LIABILITY OF REGISTERED OWNER common carrier, and having failed to exercise the
extraordinary diligence required of him by the law,
G.R. No. L-47822 December 22, 1988
PEDRO DE GUZMAN, petitioner,
vs.
COURT OF APPEALS and ERNESTO
CENDANA, respondents.
FELICIANO, J.:
Respondent Ernesto Cendana, a junk dealer, was
engaged in buying up used bottles and scrap metal
in Pangasinan. Upon gathering sufficient quantities
of such scrap material, respondent would bring
such material to Manila for resale. He utilized two
(2) six-wheeler trucks which he owned for hauling
the material to Manila. On the return trip to
Pangasinan, respondent would load his vehicles
with cargo which various merchants wanted
delivered to differing establishments in
Pangasinan. For that service, respondent charged
freight rates which were commonly lower than
regular commercial rates.
Sometime in November 1970, petitioner Pedro de
Guzman a merchant and authorized dealer of
General Milk Company (Philippines), Inc. in
Urdaneta, Pangasinan, contracted with respondent
for the hauling of 750 cartons of Liberty filled milk
from a warehouse of General Milk in Makati, Rizal,
to petitioner's establishment in Urdaneta on or
before 4 December 1970. Accordingly, on 1
December 1970, respondent loaded in Makati the
merchandise on to his trucks: 150 cartons were
loaded on a truck driven by respondent himself,
while 600 cartons were placed on board the other
truck which was driven by Manuel Estrada,
respondent's driver and employee.
Only 150 boxes of Liberty filled milk were delivered
to petitioner. The other 600 boxes never reached
petitioner, since the truck which carried these
boxes was hijacked somewhere along the
MacArthur Highway in Paniqui, Tarlac, by armed
men who took with them the truck, its driver, his
helper and the cargo.
On 6 January 1971, petitioner commenced action
against private respondent in the Court of First
Instance of Pangasinan, demanding payment of P
22,150.00, the claimed value of the lost
merchandise, plus damages and attorney's fees.
Petitioner argued that private respondent, being a
should be held liable for the value of the
undelivered goods.
In his Answer, private respondent denied that he
was a common carrier and argued that he could not
be held responsible for the value of the lost goods,
such loss having been due to force majeure.
On 10 December 1975, the trial court rendered a
Decision 1 finding private respondent to be a
common carrier and holding him liable for the value
of the undelivered goods (P 22,150.00) as well as
for P 4,000.00 as damages and P 2,000.00 as
attorney's fees.
On appeal before the Court of Appeals, respondent
urged that the trial court had erred in considering
him a common carrier; in finding that he had
habitually offered trucking services to the public; in
not exempting him from liability on the ground
of force majeure; and in ordering him to pay
damages and attorney's fees.
The Court of Appeals reversed the judgment of the
trial court and held that respondent had been
engaged in transporting return loads of freight "as
a casual
occupation — a sideline to his scrap iron business"
and not as a common carrier. Petitioner came to
this Court by way of a Petition for Review assigning
as errors the following conclusions of the Court of
Appeals:
1. that private respondent was not
a common carrier;
2. that the hijacking of
respondent's truck was force
majeure; and
3. that respondent was not liable
for the value of the undelivered
cargo. (Rollo, p. 111)
We consider first the issue of whether or not private
respondent Ernesto Cendana may, under the facts
earlier set forth, be properly characterized as a
common carrier.
The Civil Code defines "common carriers" in the
following terms:
 Article 1732. Common carriers are
persons, corporations, firms or
associations engaged in the
business of carrying or
transporting passengers or goods
or both, by land, water, or air for
compensation, offering their
services to the public.
The above article makes no distinction between
one whose principal business activity is the
carrying of persons or goods or both, and one who
does such carrying only as an ancillary activity (in
local Idiom as "a sideline"). Article 1732 also
carefully avoids making any distinction between a
person or enterprise offering transportation service
on a regular or scheduled basis and one offering
such service on an occasional, episodic or
unscheduled basis. Neither does Article 1732
distinguish between a carrier offering its services to
the "general public," i.e., the general community or
population, and one who offers services or solicits
business only from a narrow segment of the
general population. We think that Article 1733
deliberaom making such distinctions.
So understood, the concept of "common carrier"
under Article 1732 may be seen to coincide neatly
with the notion of "public service," under the Public
Service Act (Commonwealth Act No. 1416, as
amended) which at least partially supplements the
law on common carriers set forth in the Civil Code.
Under Section 13, paragraph (b) of the Public
Service Act, "public service" includes:
... every person that now or
hereafter may own, operate,
manage, or control in the
Philippines, for hire or
compensation, with general or
limited clientele, whether
permanent, occasional or
accidental, and done for general
business purposes, any common
carrier, railroad, street railway,
traction railway, subway motor
vehicle, either for freight or
passenger, or both, with or without
fixed route and whatever may be
its classification, freight or carrier
service of any class, express
service, steamboat, or steamship
line, pontines, ferries and water
craft, engaged in the
transportation of passengers or
freight or both, shipyard, marine
repair shop, wharf or dock, ice
plant,
ice-refrigeration plant, canal,
irrigation system, gas, electric
light, heat and power, water supply
and power petroleum, sewerage
system, wire or wireless
communications systems, wire or
wireless broadcasting stations and
other similar public services. ...
(Emphasis supplied)
It appears to the Court that private respondent is
properly characterized as a common carrier even
though he merely "back-hauled" goods for other
merchants from Manila to Pangasinan, although
such back-hauling was done on a periodic or
occasional rather than regular or scheduled
manner, and even though private
respondent's principal occupation was not the
carriage of goods for others. There is no dispute
that private respondent charged his customers a
fee for hauling their goods; that fee frequently fell
below commercial freight rates is not relevant here.
The Court of Appeals referred to the fact that
private respondent held no certificate of public
convenience, and concluded he was not a common
carrier. This is palpable error. A certificate of public
convenience is not a requisite for the incurring of
liability under the Civil Code provisions governing
common carriers. That liability arises the moment a
person or firm acts as a common carrier, without
regard to whether or not such carrier has also
complied with the requirements of the applicable
regulatory statute and implementing regulations
and has been granted a certificate of public
convenience or other franchise. To exempt private
respondent from the liabilities of a common carrier
because he has not secured the necessary
certificate of public convenience, would be
offensive to sound public policy; that would be to
reward private respondent precisely for failing to
comply with applicable statutory requirements. The
business of a common carrier impinges directly and
intimately upon the safety and well being and
property of those members of the general
community who happen to deal with such carrier.
The law imposes duties and liabilities upon
common carriers for the safety and protection of
those who utilize their services and the law cannot
allow a common carrier to render such duties and
liabilities merely facultative by simply failing to
obtain the necessary permits and authorizations.
We turn then to the liability of private respondent as
a common carrier.
Common carriers, "by the nature of their business
and for reasons of public policy" 2 are held to a very
high degree of care and diligence ("extraordinary
diligence") in the carriage of goods as well as of
passengers. The specific import of extraordinary
diligence in the care of goods transported by a
common carrier is, according to Article 1733,
"further expressed in Articles 1734,1735 and 1745,
numbers 5, 6 and 7" of the Civil Code.
Article 1734 establishes the general rule that
common carriers are responsible for the loss,
destruction or deterioration of the goods which they
carry, "unless the same is due to any of the
following causes only:
(1) Flood, storm, earthquake, lightning
or other natural disaster or calamity;
(2) Act of the public enemy in war,
whether international or civil;
(3) Act or omission of the shipper or
owner of the goods;
(4) The character-of the goods or
defects in the packing or-in the
containers; and
(5) Order or act of competent public
authority.
It is important to point out that the above list of
causes of loss, destruction or deterioration which
exempt the common carrier for responsibility
therefor, is a closed list. Causes falling outside the
foregoing list, even if they appear to constitute a
species of force majeure fall within the scope of
Article 1735, which provides as follows:
In all cases other than those
mentioned in numbers 1, 2, 3, 4
and 5 of the preceding article, if the
goods are lost, destroyed or
deteriorated, common carriers are
presumed to have been at fault or
to have acted negligently, unless
they prove that they observed
extraordinary diligence as
required in Article 1733.
(Emphasis supplied)
Applying the above-quoted Articles 1734 and 1735,
we note firstly that the specific cause alleged in the
instant case — the hijacking of the carrier's truck —
does not fall within any of the five (5) categories of
exempting causes listed in Article 1734. It would
follow, therefore, that the hijacking of the carrier's
vehicle must be dealt with under the provisions of
Article 1735, in other words, that the private
respondent as common carrier is presumed to have
been at fault or to have acted negligently. This
presumption, however, may be overthrown by proof
of extraordinary diligence on the part of private
respondent.
Petitioner insists that private respondent had not
observed extraordinary diligence in the care of
petitioner's goods. Petitioner argues that in the
circumstances of this case, private respondent
should have hired a security guard presumably to
ride with the truck carrying the 600 cartons of
Liberty filled milk. We do not believe, however, that
in the instant case, the standard of extraordinary
diligence required private respondent to retain a
security guard to ride with the truck and to engage
brigands in a firelight at the risk of his own life and
the lives of the driver and his helper.
The precise issue that we address here relates to
the specific requirements of the duty of
extraordinary diligence in the vigilance over the
goods carried in the specific context of hijacking or
armed robbery.
As noted earlier, the duty of extraordinary diligence
in the vigilance over goods is, under Article 1733,
given additional specification not only by Articles
1734 and 1735 but also by Article 1745, numbers
4, 5 and 6, Article 1745 provides in relevant part:
Any of the following or similar stipulations
shall be considered unreasonable, unjust
and contrary to public policy:
xxx xxx xxx
(5) that the common carrier
shall not be responsible for the
acts or omissions of his or its
employees;
(6) that the common carrier's
liability for acts committed by
thieves, or of robbers who
donot act with grave or
irresistible threat, violence or
force, is dispensed with or
diminished; and
(7) that the common carrier
shall not responsible for the
loss, destruction or
deterioration of goods on
account of the defective
 condition of the car vehicle,
ship, airplane or other
equipment used in the contract
of carriage. (Emphasis
supplied)
Under Article 1745 (6) above, a common carrier is
held responsible — and will not be allowed to divest
or to diminish such responsibility — even for acts of
strangers like thieves or robbers, except where
such thieves or robbers in fact acted "with grave or
irresistible threat, violence or force." We believe
and so hold that the limits of the duty of
extraordinary diligence in the vigilance over the
goods carried are reached where the goods are lost
as a result of a robbery which is attended by "grave
or irresistible threat, violence or force."
In the instant case, armed men held up the second
truck owned by private respondent which carried
petitioner's cargo. The record shows that an
information for robbery in band was filed in the
Court of First Instance of Tarlac, Branch 2, in
Criminal Case No. 198 entitled "People of the
Philippines v. Felipe Boncorno, Napoleon Presno,
Armando Mesina, Oscar Oria and one John Doe."
There, the accused were charged with willfully and
unlawfully taking and carrying away with them the
second truck, driven by Manuel Estrada and loaded
with the 600 cartons of Liberty filled milk destined
for delivery at petitioner's store in Urdaneta,
Pangasinan. The decision of the trial court shows
that the accused acted with grave, if not irresistible,
threat, violence or force.3 Three (3) of the five (5)
hold-uppers were armed with firearms. The robbers
not only took away the truck and its cargo but also
kidnapped the driver and his helper, detaining them
for several days and later releasing them in another
province (in Zambales). The hijacked truck was
subsequently found by the police in Quezon City.
The Court of First Instance convicted all the
accused of robbery, though not of robbery in
band. 4
In these circumstances, we hold that the
occurrence of the loss must reasonably be
regarded as quite beyond the control of the
common carrier and properly regarded as a
fortuitous event. It is necessary to recall that even
common carriers are not made absolute insurers
against all risks of travel and of transport of goods,
and are not held liable for acts or events which
cannot be foreseen or are inevitable, provided that
they shall have complied with the rigorous standard
of extraordinary diligence.
We, therefore, agree with the result reached by the
Court of Appeals that private respondent Cendana
is not liable for the value of the undelivered
merchandise which was lost because of an event
entirely beyond private respondent's control.
ACCORDINGLY, the Petition for Review on
certiorari is hereby DENIED and the Decision of the
Court of Appeals dated 3 August 1977 is
AFFIRMED. No pronouncement as to costs.
SO ORDERED.
[G.R. No. 131621. September 28, 1999]
LOADSTAR SHIPPING CO., INC., petitioner,
vs. COURT OF APPEALS and THE
MANILA INSURANCE CO.,
INC., respondents.
DECISION
DAVIDE, JR., C.J.:
Petitioner Loadstar Shipping Co., Inc.
(hereafter LOADSTAR), in this petition for review
on certiorari under Rule 45 of the 1997 Rules of
Civil Procedure, seeks to reverse and set aside the
following: (a) the 30 January 1997 decision[1] of the
Court of Appeals in CA-G.R. CV No. 36401, which
affirmed the decision of 4 October 1991[2] of the
Regional Trial Court of Manila, Branch 16, in Civil
Case No. 85-29110, ordering LOADSTAR to pay
private respondent Manila Insurance Co. (hereafter
MIC) the amount of P6,067,178, with legal interest
from the filing of the complaint until fully paid,
P8,000 as attorneys fees, and the costs of the suit;
and (b) its resolution of 19 November
1997,[3] denying LOADSTARs motion for
reconsideration of said decision.
The facts are undisputed.
On 19 November 1984, LOADSTAR received
on board its M/V Cherokee (hereafter, the vessel)
the following goods for shipment:
a) 705 bales of lawanit hardwood;
b) 27 boxes and crates of tilewood
assemblies and others; and
 c) 49 bundles of mouldings R & W (3)
Apitong Bolidenized.
The goods, amounting to P6,067,178, were insured
for the same amount with MIC against various risks
including TOTAL LOSS BY TOTAL LOSS OF THE
VESSEL. The vessel, in turn, was insured by
Prudential Guarantee & Assurance, Inc. (hereafter
PGAI) for P4 million. On 20 November 1984, on its
way to Manila from the port of Nasipit, Agusan del
Norte, the vessel, along with its cargo, sank off
Limasawa Island. As a result of the total loss of its
shipment, the consignee made a claim with
LOADSTAR which, however, ignored the same. As
the insurer, MIC paid P6,075,000 to the insured in
full settlement of its claim, and the latter executed
a subrogation receipt therefor.
On 4 February 1985, MIC filed a complaint
against LOADSTAR and PGAI, alleging that the
sinking of the vessel was due to the fault and
negligence of LOADSTAR and its employees. It
also prayed that PGAI be ordered to pay the
insurance proceeds from the loss of the vessel
directly to MIC, said amount to be deducted from
MICs claim from LOADSTAR.
In its answer, LOADSTAR denied any liability
for the loss of the shippers goods and claimed that
the sinking of its vessel was due to force
majeure.PGAI, on the other hand, averred that MIC
had no cause of action against it, LOADSTAR
being the party insured. In any event, PGAI was
later dropped as a party defendant after it paid the
insurance proceeds to LOADSTAR.
As stated at the outset, the court a
quo rendered judgment in favor of MIC, prompting
LOADSTAR to elevate the matter to the Court of
Appeals, which, however, agreed with the trial court
and affirmed its decision in toto.
In dismissing LOADSTARs appeal, the
appellate court made the following observations:
1) LOADSTAR cannot be considered a
private carrier on the sole ground that
there was a single shipper on that
fateful voyage. The court noted that
the charter of the vessel was limited to
the ship, but LOADSTAR retained
control over its crew.[4]
2) As a common carrier, it is the Code of
Commerce, not the Civil Code, which
should be applied in determining the
rights and liabilities of the parties.
3) The vessel was not seaworthy
because it was undermanned on the
day of the voyage. If it had been
seaworthy, it could have withstood the
natural and inevitable action of the
sea on 20 November 1984, when the
condition of the sea was
moderate. The vessel sank, not
because of force majeure, but
because it was not
seaworthy. LOADSTARS allegation
that the sinking was probably due to
the convergence of the winds, as
stated by a PAGASA expert, was not
duly proven at the trial. The limited
liability rule, therefore, is not
applicable considering that, in this
case, there was an actual finding of
negligence on the part of the carrier.[5]
4) Between MIC and LOADSTAR, the
provisions of the Bill of Lading do not
apply because said provisions bind
only the shipper/consignee and the
carrier.When MIC paid the shipper for
the goods insured, it was subrogated
to the latters rights as against the
carrier, LOADSTAR.[6]
5) There was a clear breach of the
contract of carriage when the shippers
goods never reached their
destination. LOADSTARs defense of
diligence of a good father of a family
in the training and selection of its crew
is unavailing because this is not a
proper or complete defense in culpa
contractual.
6) Art. 361 (of the Code of Commerce)
has been judicially construed to mean
that when goods are delivered on
board a ship in good order and
condition, and the shipowner delivers
them to the shipper in bad order and
condition, it then devolves upon the
shipowner to both allege and prove
that the goods were damaged by
reason of some fact which legally
exempts him from
liability. Transportation of the
merchandise at the risk and venture of
the shipper means that the latter
bears the risk of loss or deterioration
of his goods arising from fortuitous
events, force majeure, or the inherent
nature and defects of the goods, but
not those caused by the presumed
negligence or fault of the carrier,
unless otherwise proved.[7]
 The errors assigned by LOADSTAR boil down
to a determination of the following issues:
(1) Is the M/V Cherokee a private or a
common carrier?
(2) Did LOADSTAR observe due and/or
ordinary diligence in these premises?
Regarding the first issue, LOADSTAR submits
that the vessel was a private carrier because it was
not issued a certificate of public convenience, it did
not have a regular trip or schedule nor a fixed route,
and there was only one shipper, one consignee for
a special cargo.
In refutation, MIC argues that the issue as to
the classification of the M/V Cherokee was not
timely raised below; hence, it is barred by
estoppel.While it is true that the vessel had on
board only the cargo of wood products for delivery
to one consignee, it was also carrying passengers
as part of its regular business. Moreover, the bills
of lading in this case made no mention of any
charter party but only a statement that the vessel
was a general cargo carrier. Neither was there any
special arrangement between LOADSTAR and the
shipper regarding the shipment of the cargo. The
singular fact that the vessel was carrying a
particular type of cargo for one shipper is not
sufficient to convert the vessel into a private carrier.
As regards the second error, LOADSTAR
argues that as a private carrier, it cannot be
presumed to have been negligent, and the burden
of proving otherwise devolved upon MIC.[8]
LOADSTAR also maintains that the vessel
was seaworthy. Before the fateful voyage on 19
November 1984, the vessel was allegedly dry
docked at Keppel Philippines Shipyard and was
duly inspected by the maritime safety engineers of
the Philippine Coast Guard, who certified that the
ship was fit to undertake a voyage. Its crew at the
time was experienced, licensed and
unquestionably competent. With all these
precautions, there could be no other conclusion
except that LOADSTAR exercised the diligence of
a good father of a family in ensuring the vessels
seaworthiness.
LOADSTAR further claims that it was not
responsible for the loss of the cargo, such loss
being due to force majeure. It points out that when
the vessel left Nasipit, Agusan del Norte, on 19
November 1984, the weather was fine until the next
day when the vessel sank due to strong
waves. MICs witness, Gracelia Tapel, fully
established the existence of two typhoons,
WELFRING and YOLING, inside the Philippine
area of responsibility. In fact, on 20 November
1984, signal no. 1 was declared over Eastern
Visayas, which includes Limasawa Island. Tapel
also testified that the convergence of winds brought
about by these two typhoons strengthened wind
velocity in the area, naturally producing strong
waves and winds, in turn, causing the vessel to list
and eventually sink.
LOADSTAR goes on to argue that, being a
private carrier, any agreement limiting its liability,
such as what transpired in this case, is valid. Since
the cargo was being shipped at owners risk,
LOADSTAR was not liable for any loss or damage
to the same. Therefore, the Court of Appeals erred
in holding that the provisions of the bills of lading
apply only to the shipper and the carrier, and not to
the insurer of the goods, which conclusion runs
counter to the Supreme Courts ruling in the case
of St. Paul Fire & Marine Insurance Co. v.
Macondray & Co., Inc.,[9] and National Union Fire
Insurance Company of Pittsburg v. Stolt-Nielsen
Phils., Inc.[10]
Finally, LOADSTAR avers that MICs claim
had already prescribed, the case having been
instituted beyond the period stated in the bills of
lading for instituting the same suits based upon
claims arising from shortage, damage, or non-
delivery of shipment shall be instituted within sixty
days from the accrual of the right of action. The
vessel sank on 20 November 1984; yet, the case
for recovery was filed only on 4 February 1985.
MIC, on the other hand, claims that
LOADSTAR was liable, notwithstanding that the
loss of the cargo was due to force
majeure, because the same concurred with
LOADSTARs fault or negligence.
Secondly, LOADSTAR did not raise the issue
of prescription in the court below; hence, the same
must be deemed waived.
Thirdly, the limited liability theory is not
applicable in the case at bar because LOADSTAR
was at fault or negligent, and because it failed to
maintain a seaworthy vessel. Authorizing the
voyage notwithstanding its knowledge of a typhoon
is tantamount to negligence.
We find no merit in this petition.
Anent the first assigned error, we hold that
LOADSTAR is a common carrier. It is not
necessary that the carrier be issued a certificate of
public convenience, and this public character is not
altered by the fact that the carriage of the goods in
question was periodic, occasional, episodic or
unscheduled.
 In support of its position, LOADSTAR relied on
the 1968 case of Home Insurance Co. v. American
Steamship Agencies, Inc.,[11] where this Court held
that a common carrier transporting special cargo or
chartering the vessel to a special person becomes
a private carrier that is not subject to the provisions
of the Civil Code. Any stipulation in the charter
party absolving the owner from liability for loss due
to the negligence of its agent is void only if the strict
policy governing common carriers is upheld. Such
policy has no force where the public at large is not
involved, as in the case of a ship totally chartered
for the use of a single party. LOADSTAR also
cited Valenzuela Hardwood and Industrial Supply,
Inc. v. Court of Appeals[12] and National Steel Corp.
v. Court of Appeals,[13] both of which upheld
the Home Insurance doctrine.
These cases invoked by LOADSTAR are not
applicable in the case at bar for simple reason that
the factual settings are different. The records do
not disclose that the M/V Cherokee, on the date in
question, undertook to carry a special cargo or was
chartered to a special person only. There was no
charter party. The bills of lading failed to show any
special arrangement, but only a general provision
to the effect that the M/V Cherokee was a general
cargo carrier.[14] Further, the bare fact that the
vessel was carrying a particular type of cargo for
one shipper, which appears to be purely
coincidental, is not reason enough to convert the
vessel from a common to a private carrier,
especially where, as in this case, it was shown that
the vessel was also carrying passengers.
Under the facts and circumstances obtaining
in this case, LOADSTAR fits the definition of a
common carrier under Article 1732 of the Civil
Code. In the case of De Guzman v. Court of
Appeals,[15] the Court juxtaposed the statutory
definition of common carriers with the peculiar
circumstances of that case, viz.:
The Civil Code defines common carriers in the
following terms:
Article 1732. Common carriers are persons,
corporations, firms or associations engaged in the
business of carrying or transporting passengers or
goods or both, by land, water, or air for
compensation, offering their services to the public.
The above article makes no distinction between
one whose principal business activity is the
carrying of persons or goods or both, and one who
does such carrying only as an ancillary activity (in
local idiom, as a sideline. Article 1732 also carefully
avoids making any distinction between a person or
enterprise offering transportation service on
a regular or scheduled basis and one offering such
service on an occasional, episodic or unscheduled
basis.Neither does Article 1732 distinguish
between a carrier offering its services to the
general public, i.e., the general community or
population, and one who offers services or solicits
business only from a narrow segment of the
general population. We think that Article 1733
deliberately refrained from making such
distinctions.
xxx
It appears to the Court that private respondent is
properly characterized as a common carrier even
though he merely back-hauled goods for other
merchants from Manila to Pangasinan, although
such backhauling was done on a periodic or
occasional rather than regular or scheduled
manner, and even though private
respondents principal occupation was not the
carriage of goods for others. There is no dispute
that private respondent charged his customers a
fee for hauling their goods; that that fee frequently
fell below commercial freight rates is not relevant
here.
The Court of Appeals referred to the fact that
private respondent held no certificate of public
convenience, and concluded he was not a common
carrier.This is palpable error. A certificate of public
convenience is not a requisite for the incurring of
liability under the Civil Code provisions governing
common carriers. That liability arises the moment a
person or firm acts as a common carrier, without
regard to whether or not such carrier has also
complied with the requirements of the applicable
regulatory statute and implementing regulations
and has been granted a certificate of public
convenience or other franchise. To exempt private
respondent from the liabilities of a common carrier
because he has not secured the necessary
certificate of public convenience, would be
offensive to sound public policy; that would be to
reward private respondent precisely for failing to
comply with applicable statutory requirements. The
business of a common carrier impinges directly and
intimately upon the safety and well being and
property of those members of the general
community who happen to deal with such
carrier. The law imposes duties and liabilities upon
common carriers for the safety and protection of
those who utilize their services and the law cannot
allow a common carrier to render such duties and
liabilities merely facultative by simply failing to
obtain the necessary permits and authorizations.
Moving on to the second assigned error, we
find that the M/V Cherokee was not seaworthy
when it embarked on its voyage on 19 November
1984.The vessel was not even sufficiently manned
at the time. For a vessel to be seaworthy, it must
be adequately equipped for the voyage and
manned with a sufficient number of competent
officers and crew. The failure of a common carrier
to maintain in seaworthy condition its vessel
involved in a contract of carriage is a clear breach
of its duty prescribed in Article 1755 of the Civil
Code.[16]
Neither do we agree with LOADSTARs
argument that the limited liability theory should be
applied in this case. The doctrine of limited liability
does not apply where there was negligence on the
part of the vessel owner or agent.[17] LOADSTAR
was at fault or negligent in not maintaining a
seaworthy vessel and in having allowed its vessel
to sail despite knowledge of an approaching
typhoon. In any event, it did not sink because of any
storm that may be deemed as force majeure,
inasmuch as the wind condition in the area where
it sank was determined to be moderate. Since it
was remiss in the performance of its duties,
LOADSTAR cannot hide behind the limited liability
doctrine to escape responsibility for the loss of the
vessel and its cargo.
LOADSTAR also claims that the Court of
Appeals erred in holding it liable for the loss of the
goods, in utter disregard of this Courts
pronouncements in St. Paul Fire & Marine Ins. Co.
v. Macondray & Co., Inc.,[18] and National Union
Fire Insurance v. Stolt-Nielsen Phils., Inc.[19] It was
ruled in these two cases that after paying the claim
of the insured for damages under the insurance
policy, the insurer is subrogated merely to the rights
of the assured, that is, it can recover only the
amount that may, in turn, be recovered by the
latter. Since the right of the assured in case of loss
or damage to the goods is limited or restricted by
the provisions in the bills of lading, a suit by the
insurer as subrogee is necessarily subject to the
same limitations and restrictions.We do not
agree. In the first place, the cases relied on by
LOADSTAR involved a limitation on the carriers
liability to an amount fixed in the bill of lading which
the parties may enter into, provided that the same
was freely and fairly agreed upon (Articles 1749-
1750). On the other hand, the stipulation in the
case at bar effectively reduces the common
carriers liability for the loss or destruction of the
goods to a degree less than extraordinary (Articles
1744 and 1745), that is, the carrier is not liable for
any loss or damage to shipments made at owners
risk. Such stipulation is obviously null and void for
being contrary to public policy. [20] It has been said:
Three kinds of stipulations have often been made
in a bill of lading. The first is one exempting the
carrier from any and all liability for loss or damage
occasioned by its own negligence. The second is
one providing for an unqualified limitation of such
liability to an agreed valuation. And the third is one
limiting the liability of the carrier to an agreed
valuation unless the shipper declares a higher
value and pays a higher rate of freight. According
to an almost uniform weight of authority, the first
and second kinds of stipulations are invalid as
being contrary to public policy, but the third is valid
and enforceable.[21]
Since the stipulation in question is null and void, it
follows that when MIC paid the shipper, it was
subrogated to all the rights which the latter has
against the common carrier, LOADSTAR.
Neither is there merit to the contention that the
claim in this case was barred by prescription. MICs
cause of action had not yet prescribed at the time it
was concerned. Inasmuch as neither the Civil Code
nor the Code of Commerce states a specific
prescriptive period on the matter, the Carriage of
Goods by Sea Act (COGSA) which provides for a
one-year period of limitation on claims for loss of,
or damage to, cargoes sustained during transit may
be applied suppletorily to the case at bar. This one-
year prescriptive period also applies to the insurer
of the good.[22] In this case, the period for filing the
action for recovery has not yet elapsed. Moreover,
a stipulation reducing the one-year period is null
and void;[23] it must, accordingly, be struck down.
WHEREFORE, the instant petition is DENIED
and the challenged decision of 30 January 1997 of
the Court of Appeals in CA-G.R. CV No. 36401 is
AFFIRMED. Costs against petitioner.
SO ORDERED.
[G.R. No. 148496. March 19, 2002]
VIRGINES CALVO doing business under the
name and style TRANSORIENT
CONTAINER TERMINAL SERVICES,
 INC., petitioner, vs. UCPB GENERAL
INSURANCE CO., INC. (formerly Allied
Guarantee Ins. Co., Inc.) respondent.
DECISION
MENDOZA, J.:
This is a petition for review of the
decision,[1] dated May 31, 2001, of the Court of
Appeals, affirming the decision[2] of the Regional
Trial Court, Makati City, Branch 148, which ordered
petitioner to pay respondent, as subrogee, the
amount of P93,112.00 with legal interest,
representing the value of damaged cargo handled
by petitioner, 25% thereof as attorneys fees, and
the cost of the suit.
The facts are as follows:
Petitioner Virgines Calvo is the owner of
Transorient Container Terminal Services, Inc.
(TCTSI), a sole proprietorship customs broker. At
the time material to this case, petitioner entered
into a contract with San Miguel Corporation (SMC)
for the transfer of 114 reels of semi-chemical fluting
paper and 124 reels of kraft liner board from the
Port Area in Manila to SMCs warehouse at the
Tabacalera Compound, Romualdez St., Ermita,
Manila. The cargo was insured by respondent
UCPB General Insurance Co., Inc.
On July 14, 1990, the shipment in question,
contained in 30 metal vans, arrived in Manila on
board M/V Hayakawa Maru and, after 24 hours,
were unloaded from the vessel to the custody of the
arrastre operator, Manila Port Services, Inc. From
July 23 to July 25, 1990, petitioner, pursuant to her
contract with SMC, withdrew the cargo from the
arrastre operator and delivered it to SMCs
warehouse in Ermita, Manila. On July 25, 1990, the
goods were inspected by Marine Cargo Surveyors,
who found that 15 reels of the semi-chemical fluting
paper were wet/stained/torn and 3 reels of kraft
liner board were likewise torn. The damage was
placed at P93,112.00.
SMC collected payment from respondent
UCPB under its insurance contract for the
aforementioned amount. In turn, respondent, as
subrogee of SMC, brought suit against petitioner in
the Regional Trial Court, Branch 148, Makati City,
which, on December 20, 1995, rendered judgment
finding petitioner liable to respondent for the
damage to the shipment.
The trial court held:
It cannot be denied . . . that the subject cargoes
sustained damage while in the custody of
defendants. Evidence such as the Warehouse
Entry Slip (Exh. E); the Damage Report (Exh. F)
with entries appearing therein, classified as TED
and TSN, which the claims processor, Ms. Agrifina
De Luna, claimed to be tearrage at the end and
tearrage at the middle of the subject damaged
cargoes respectively, coupled with the Marine
Cargo Survey Report (Exh. H - H-4-A) confirms the
fact of the damaged condition of the subject
cargoes. The surveyor[s] report (Exh. H-4-A) in
particular, which provides among others that:
. . . we opine that damages sustained by shipment
is attributable to improper handling in transit
presumably whilst in the custody of the broker . . . .
is a finding which cannot be traversed and
overturned.
The evidence adduced by the defendants is not
enough to sustain [her] defense that [she is] are not
liable. Defendant by reason of the nature of [her]
business should have devised ways and means in
order to prevent the damage to the cargoes which
it is under obligation to take custody of and to
forthwith deliver to the consignee. Defendant did
not present any evidence on what precaution [she]
performed to prevent [the] said incident, hence the
presumption is that the moment the defendant
accepts the cargo [she] shall perform such
extraordinary diligence because of the nature of the
cargo.
....
Generally speaking under Article 1735 of the Civil
Code, if the goods are proved to have been lost,
destroyed or deteriorated, common carriers are
presumed to have been at fault or to have acted
negligently, unless they prove that they have
observed the extraordinary diligence required by
law. The burden of the plaintiff, therefore, is to
prove merely that the goods he transported have
been lost, destroyed or deteriorated. Thereafter,
the burden is shifted to the carrier to prove that he
has exercised the extraordinary diligence required
by law. Thus, it has been held that the mere proof
of delivery of goods in good order to a carrier, and
of their arrival at the place of destination in bad
order, makes out a prima facie case against the
carrier, so that if no explanation is given as to how
the injury occurred, the carrier must be held
responsible. It is incumbent upon the carrier to
prove that the loss was due to accident or some
other circumstances inconsistent with its liability.
(cited in Commercial Laws of the Philippines by
Agbayani, p. 31, Vol. IV, 1989 Ed.)
Defendant, being a customs brother,
warehouseman and at the same time a common
carrier is supposed [to] exercise [the] extraordinary
diligence required by law, hence the extraordinary
responsibility lasts from the time the goods are
unconditionally placed in the possession of and
received by the carrier for transportation until the
same are delivered actually or constructively by the
carrier to the consignee or to the person who has
the right to receive the same.[3]
Accordingly, the trial court ordered petitioner
to pay the following amounts
1. The sum of P93,112.00 plus interest;
2. 25% thereof as lawyers fee;
Petitioner contends that contrary to the
findings of the trial court and the Court of Appeals,
she is not a common carrier but a private carrier
because, as a customs broker and warehouseman,
she does not indiscriminately hold her services out
to the public but only offers the same to select
parties with whom she may contract in the conduct
of her business.
The contention has no merit. In De Guzman v.
Court of Appeals,[7] the Court dismissed a similar
contention and held the party to be a common
carrier, thus
The Civil Code defines common carriers in the
following terms:
Article 1732. Common carriers are persons,
corporations, firms or associations engaged in the
business of carrying or transporting passengers or
goods or both, by land, water, or air for
compensation, offering their services to the public.

3. Costs of suit.[4] The above article makes no distinction between

one whose principal business activity is the
The decision was affirmed by the Court of carrying of persons or goods or both, and one who
Appeals on appeal. Hence this petition for review does such carrying only as an ancillary activity . . .
on certiorari. Article 1732 also carefully avoids making any
distinction between a person or enterprise offering
Petitioner contends that: transportation service on a regular or scheduled
I. THE COURT OF APPEALS basis and one offering such service on
COMMITTED SERIOUS AND an occasional, episodic or unscheduled
REVERSIBLE ERROR [IN] basis. Neither does Article 1732 distinguish
DECIDING THE CASE NOT ON THE between a carrier offering its services to
EVIDENCE PRESENTED BUT ON the general public, i.e., the general community or
PURE SURMISES, SPECULATIONS population, and one who offers services or solicits
AND MANIFESTLY MISTAKEN business only from a narrow segment of the
INFERENCE. general population. We think that Article 1732
deliberately refrained from making such
II. THE COURT OF APPEALS distinctions.
COMMITTED SERIOUS AND
REVERSIBLE ERROR IN So understood, the concept of common carrier
CLASSIFYING THE PETITIONER AS under Article 1732 may be seen to coincide neatly
A COMMON CARRIER AND NOT AS with the notion of public service, under the Public
PRIVATE OR SPECIAL CARRIER Service Act (Commonwealth Act No. 1416, as
WHO DID NOT HOLD ITS amended) which at least partially supplements the
SERVICES TO THE PUBLIC.[5] law on common carriers set forth in the Civil
It will be convenient to deal with these Code.Under Section 13, paragraph (b) of the Public
contentions in the inverse order, for if petitioner is Service Act, public service includes:
not a common carrier, although both the trial court
and the Court of Appeals held otherwise, then she x x x every person that now or hereafter may own,
is indeed not liable beyond what ordinary diligence operate, manage, or control in the Philippines, for
in the vigilance over the goods transported by her, hire or compensation, with general or limited
would require.[6] Consequently, any damage to the clientele, whether permanent, occasional or
cargo she agrees to transport cannot be presumed accidental, and done for general business
to have been due to her fault or negligence. purposes, any common carrier, railroad, street
railway, traction railway, subway motor vehicle,
either for freight or passenger, or both, with or
without fixed route and whatever may be its
classification, freight or carrier service of any class,
express service, steamboat, or steamship line,
pontines, ferries and water craft, engaged in the
transportation of passengers or freight or both,
shipyard, marine repair shop, wharf or dock, ice
plant, ice-refrigeration plant, canal, irrigation
system, gas, electric light, heat and power, water
supply and power petroleum, sewerage system,
wire or wireless communications systems, wire or
wireless broadcasting stations and other similar
public services. x x x [8]
There is greater reason for holding petitioner
to be a common carrier because the transportation
of goods is an integral part of her business. To
uphold petitioners contention would be to deprive
those with whom she contracts the protection which
the law affords them notwithstanding the fact that
the obligation to carry goods for her customers, as
already noted, is part and parcel of petitioners
business.
Now, as to petitioners liability, Art. 1733 of the
Civil Code provides:
Common carriers, from the nature of their business
and for reasons of public policy, are bound to
observe extraordinary diligence in the vigilance
over the goods and for the safety of the passengers
transported by them, according to all the
circumstances of each case. . . .
In Compania Maritima v. Court of
Appeals,[9] the meaning of extraordinary diligence
in the vigilance over goods was explained thus:
The extraordinary diligence in the vigilance over the
goods tendered for shipment requires the common
carrier to know and to follow the required
precaution for avoiding damage to, or destruction
of the goods entrusted to it for sale, carriage and
delivery. It requires common carriers to render
service with the greatest skill and foresight and to
use all reasonable means to ascertain the nature
and characteristic of goods tendered for shipment,
and to exercise due care in the handling and
stowage, including such methods as their nature
requires.
In the case at bar, petitioner denies liability for
the damage to the cargo. She claims that the
spoilage or wettage took place while the goods
were in the custody of either the carrying vessel
M/V Hayakawa Maru, which transported the cargo
to Manila, or the arrastre operator, to whom the
goods were unloaded and who allegedly kept them
in open air for nine days from July 14 to July 23,
1998 notwithstanding the fact that some of the
containers were deformed, cracked, or otherwise
damaged, as noted in the Marine Survey Report
(Exh. H), to wit:
MAXU-2062880 - rain gutter deformed/cracked
ICSU-363461-3 - left side rubber gasket on door
distorted/partly loose
PERU-204209-4 - with pinholes on roof panel right
portion
TOLU-213674-3 - wood flooring we[t] and/or with
signs of water
soaked
MAXU-201406-0 - with dent/crack on roof panel
ICSU-412105-0 - rubber gasket on left side/door
panel partly detached loosened.[10]
In addition, petitioner claims that Marine
Cargo Surveyor Ernesto Tolentino testified that he
has no personal knowledge on whether the
container vans were first stored in petitioners
warehouse prior to their delivery to the
consignee. She likewise claims that after
withdrawing the container vans from the arrastre
operator, her driver, Ricardo Nazarro, immediately
delivered the cargo to SMCs warehouse in Ermita,
Manila, which is a mere thirty-minute drive from the
Port Area where the cargo came from. Thus, the
damage to the cargo could not have taken place
while these were in her custody.[11]
Contrary to petitioners assertion, the Survey
Report (Exh. H) of the Marine Cargo Surveyors
indicates that when the shipper transferred the
cargo in question to the arrastre operator, these
were covered by clean Equipment Interchange
Report (EIR) and, when petitioners employees
withdrew the cargo from the arrastre operator, they
did so without exception or protest either with
regard to the condition of container vans
or their contents. The Survey Report pertinently
reads
Details of Discharge:
Shipment, provided with our protective supervision
was noted discharged ex vessel to dock of Pier #13
South Harbor, Manila on 14 July 1990,
containerized onto 30 x 20 secure metal vans,
covered by clean EIRs. Except for slight dents and
paint scratches on side and roof panels, these
containers were deemed to have [been] received in
good condition.
....
Transfer/Delivery:
On July 23, 1990, shipment housed onto 30 x 20
cargo containers was [withdrawn] by Transorient
Container Services, Inc. . . . without exception.
[The cargo] was finally delivered to the consignees
storage warehouse located at Tabacalera
Compound, Romualdez Street, Ermita,
Manila from July 23/25, 1990.[12]
As found by the Court of Appeals:
From the [Survey Report], it [is] clear that the
shipment was discharged from the vessel to the
arrastre, Marina Port Services Inc., in good order
and condition as evidenced by clean Equipment
Interchange Reports (EIRs). Had there been any
damage to the shipment, there would have been a
report to that effect made by the arrastre
operator. The cargoes were withdrawn by the
defendant-appellant from the arrastre still in good
order and condition as the same were received by
the former without exception, that is, without any
report of damage or loss. Surely, if the container
vans were deformed, cracked, distorted or dented,
the defendant-appellant would report it immediately
to the consignee or make an exception on the
delivery receipt or note the same in the Warehouse
Entry Slip (WES). None of these took place. To put
it simply, the defendant-appellant received the
shipment in good order and condition and delivered
the same to the consignee damaged. We can only
conclude that the damages to the cargo occurred
while it was in the possession of the defendant-
appellant. Whenever the thing is lost (or damaged)
in the possession of the debtor (or obligor), it shall
be presumed that the loss (or damage) was due to
his fault, unless there is proof to the contrary. No
proof was proffered to rebut this legal presumption
and the presumption of negligence attached to a
common carrier in case of loss or damage to the
goods.[13]
Anent petitioners insistence that the cargo
could not have been damaged while in her custody
as she immediately delivered the containers to
SMCs compound, suffice it to say that to prove the
exercise of extraordinary diligence, petitioner must
do more than merely show the possibility that some
other party could be responsible for the damage. It
must prove that it used all reasonable means to
ascertain the nature and characteristic of goods
tendered for [transport] and that [it] exercise[d] due
care in the handling [thereof]. Petitioner failed to do
this.
Nor is there basis to exempt petitioner from
liability under Art. 1734(4), which provides
Common carriers are responsible for the loss,
destruction, or deterioration of the goods, unless
the same is due to any of the following causes only:
(4) The character of the goods or defects in the
packing or in the containers.
For this provision to apply, the rule is that if the
improper packing or, in this case, the defect/s in the
container, is/are known to the carrier or his
employees or apparent upon ordinary observation,
but he nevertheless accepts the same without
protest or exception notwithstanding such
condition, he is not relieved of liability for damage
resulting therefrom.[14] In this case, petitioner
accepted the cargo without exception despite the
apparent defects in some of the container
vans. Hence, for failure of petitioner to prove that
she exercised extraordinary diligence in the
carriage of goods in this case or that she is exempt
from liability, the presumption of negligence as
provided under Art. 1735[15] holds.
WHEREFORE, the decision of the Court of
Appeals, dated May 31, 2001, is AFFIRMED.
SO ORDERED.
G.R. No. 101089. April 7, 1993.
ESTRELLITA M. BASCOS, petitioners,
vs.
COURT OF APPEALS and RODOLFO A.
CIPRIANO, respondents.
SYLLABUS
1. CIVIL LAW; COMMON CARRIERS; DEFINED;
TEST TO DETERMINE COMMON CARRIER. —
Article 1732 of the Civil Code defines a common
carrier as "(a) person, corporation or firm, or
association engaged in the business of carrying or
transporting passengers or goods or both, by land,
water or air, for compensation, offering their
services to the public." The test to determine a
common carrier is "whether the given undertaking
is a part of the business engaged in by the carrier
which he has held out to the general public as his
occupation rather than the quantity or extent of the
business transacted." . . . The holding of the Court
in De Guzman vs. Court of Appeals is instructive.
In referring to Article 1732 of the Civil Code, it held
thus: "The above article makes no distinction
between one whose principal business activity is
the carrying of persons or goods or both, and one
who does such carrying only as an ancillary activity
(in local idiom, as a "sideline"). Article 1732 also
carefully avoids making any distinction between a
person or enterprise offering transportation service
on a regular or scheduled basis and one offering
such service on an occasional, episodic or
unscheduled basis. Neither does Article 1732
distinguished between a carrier offering its services
to the "general public," i.e., the general community
or population, and one who offers services or
solicits business only from a narrow segment of the
general population. We think that Article 1732
deliberately refrained from making such
distinctions."
2. ID.; ID.; DILIGENCE REQUIRED IN VIGILANCE
OVER GOODS TRANSPORTED; WHEN
PRESUMPTION OF NEGLIGENCE ARISES;
HOW PRESUMPTION OVERCAME; WHEN
PRESUMPTION MADE ABSOLUTE. — Common
carriers are obliged to observe extraordinary
diligence in the vigilance over the goods
transported by them. Accordingly, they are
presumed to have been at fault or to have acted
negligently if the goods are lost, destroyed or
deteriorated. There are very few instances when
the presumption of negligence does not attach and
these instances are enumerated in Article 1734. In
those cases where the presumption is applied, the
common carrier must prove that it exercised
extraordinary diligence in order to overcome the
presumption . . . The presumption of negligence
was raised against petitioner. It was petitioner's
burden to overcome it. Thus, contrary to her
assertion, private respondent need not introduce
any evidence to prove her negligence. Her own
failure to adduce sufficient proof of extraordinary
diligence made the presumption conclusive against
her.
3. ID.; ID.; HIJACKING OF GOODS; CARRIER
PRESUMED NEGLIGENT; HOW CARRIER
ABSOLVED FROM LIABILITY. — In De Guzman
vs. Court of Appeals, the Court held that hijacking,
not being included in the provisions of Article 1734,
must be dealt with under the provisions of Article
1735 and thus, the common carrier is presumed to
have been at fault or negligent. To exculpate the
carrier from liability arising from hijacking, he must
prove that the robbers or the hijackers acted with
grave or irresistible threat, violence, or force. This
is in accordance with Article 1745 of the Civil Code
which provides: "Art. 1745. Any of the following or
similar stipulations shall be considered
unreasonable, unjust and contrary to public policy .
. . (6) That the common carrier's liability for acts
committed by thieves, or of robbers who do not act
with grave or irresistible threat, violences or force,
is dispensed with or diminished"; In the same case,
the Supreme Court also held that: "Under Article
1745 (6) above, a common carrier is held
responsible — and will not be allowed to divest or
to diminish such responsibility — even for acts of
strangers like thieves or robbers, except where
such thieves or robbers in fact acted "with grave of
irresistible threat, violence of force," We believe
and so hold that the limits of the duty of
extraordinary diligence in the vigilance over the
goods carried are reached where the goods are lost
as a result of a robbery which is attended by "grave
or irresistible threat, violence or force."
4. REMEDIAL LAW; EVIDENCE; JUDICIAL
ADMISSIONS CONCLUSIVE. — In this case,
petitioner herself has made the admission that she
was in the trucking business, offering her trucks to
those with cargo to move. Judicial admissions are
conclusive and no evidence is required to prove the
same.
5. ID.; ID.; BURDEN OF PROOF RESTS WITH
PARTY WHO ALLEGES A FACT. — Petitioner
presented no other proof of the existence of the
contract of lease. He who alleges a fact has the
burden of proving it.
6. ID.; ID.; AFFIDAVITS NOT CONSIDERED BEST
EVIDENCE IF AFFIANTS AVAILABLE AS
WITNESSES. — While the affidavit of Juanito
Morden, the truck helper in the hijacked truck, was
presented as evidence in court, he himself was a
witness as could be gleaned from the contents of
the petition. Affidavits are not considered the best
evidence if the affiants are available as witnesses.
7. CIVIL LAW; OBLIGATIONS AND CONTRACTS;
CONTRACT IS WHAT LAW DEFINES IT TO BE.
— Granting that the said evidence were not self-
serving, the same were not sufficient to prove that
the contract was one of lease. It must be
understood that a contract is what the law defines
it to be and not what it is called by the contracting
parties.
DECISION
CAMPOS, JR., J p:
This is a petition for review on certiorari of the
decision ** of the Court of Appeals in "RODOLFO
A. CIPRIANO, doing business under the name
CIPRIANO TRADING ENTERPRISES plaintiff-
appellee, vs. ESTRELLITA M. BASCOS, doing
business under the name of BASCOS TRUCKING,
defendant-appellant," C.A.-G.R. CV No. 25216, the
dispositive portion of which is quoted hereunder:
"PREMISES considered, We find no reversible
error in the decision appealed from, which is hereby
affirmed in toto. Costs against appellant." 1
The facts, as gathered by this Court, are as follows:
Rodolfo A. Cipriano representing Cipriano Trading
Enterprise (CIPTRADE for short) entered into a
hauling contract 2 with Jibfair Shipping Agency
Corporation whereby the former bound itself to haul
the latter's 2,000 m/tons of soya bean meal from
Magallanes Drive, Del Pan, Manila to the
warehouse of Purefoods Corporation in Calamba,
Laguna. To carry out its obligation, CIPTRADE,
through Rodolfo Cipriano, subcontracted with
Estrellita Bascos (petitioner) to transport and to
deliver 400 sacks of soya bean meal worth
P156,404.00 from the Manila Port Area to
Calamba, Laguna at the rate of P50.00 per metric
ton. Petitioner failed to deliver the said cargo. As a
consequence of that failure, Cipriano paid Jibfair
Shipping Agency the amount of the lost goods in
accordance with the contract which stated that:
"1. CIPTRADE shall be held liable and answerable
for any loss in bags due to theft, hijacking and non-
delivery or damages to the cargo during transport
at market value, . . ." 3
Cipriano demanded reimbursement from petitioner
but the latter refused to pay. Eventually, Cipriano
filed a complaint for a sum of money and damages
with writ of preliminary attachment 4 for breach of a
contract of carriage. The prayer for a Writ of
Preliminary Attachment was supported by an
affidavit 5 which contained the following
allegations:
"4. That this action is one of those specifically
mentioned in Sec. 1, Rule 57 the Rules of Court,
whereby a writ of preliminary attachment may
lawfully issue, namely:
"(e) in an action against a party who has removed
or disposed of his property, or is about to do so,
with intent to defraud his creditors;"
5. That there is no sufficient security for the claim
sought to be enforced by the present action;
6. That the amount due to the plaintiff in the above-
entitled case is above all legal counterclaims;"
The trial court granted the writ of preliminary
attachment on February 17, 1987.
In her answer, petitioner interposed the following
defenses: that there was no contract of carriage
since CIPTRADE leased her cargo truck to load the
cargo from Manila Port Area to Laguna; that
CIPTRADE was liable to petitioner in the amount of
P11,000.00 for loading the cargo; that the truck
carrying the cargo was hijacked along Canonigo
St., Paco, Manila on the night of October 21, 1988;
that the hijacking was immediately reported to
CIPTRADE and that petitioner and the police
exerted all efforts to locate the hijacked properties;
that after preliminary investigation, an information
for robbery and carnapping were filed against Jose
Opriano, et al.; and that hijacking, being a force
majeure, exculpated petitioner from any liability to
CIPTRADE.
After trial, the trial court rendered a decision *** the
dispositive portion of which reads as follows:
"WHEREFORE, judgment is hereby rendered in
favor of plaintiff and against defendant ordering the
latter to pay the former:
1. The amount of ONE HUNDRED FIFTY-SIX
THOUSAND FOUR HUNDRED FOUR PESOS
(P156,404.00) as an (sic) for actual damages with
legal interest of 12% per cent per annum to be
counted from December 4, 1986 until fully paid;
2. The amount of FIVE THOUSAND PESOS
(P5,000.00) as and for attorney's fees; and
3. The costs of the suit.
The "Urgent Motion To Dissolve/Lift preliminary
Attachment" dated March 10, 1987 filed by
defendant is DENIED for being moot and
academic.
SO ORDERED." 6
Petitioner appealed to the Court of Appeals but
respondent Court affirmed the trial court's
judgment.
Consequently, petitioner filed this petition where
she makes the following assignment of errors; to
wit:
"I. THE RESPONDENT COURT ERRED IN
HOLDING THAT THE CONTRACTUAL
RELATIONSHIP BETWEEN PETITIONER AND
PRIVATE RESPONDENT WAS CARRIAGE OF
GOODS AND NOT LEASE OF CARGO TRUCK.
II. GRANTING, EX GRATIA ARGUMENTI, THAT
THE FINDING OF THE RESPONDENT COURT
THAT THE CONTRACTUAL RELATIONSHIP
BETWEEN PETITIONER AND PRIVATE
RESPONDENT WAS CARRIAGE OF GOODS IS
CORRECT, NEVERTHELESS, IT ERRED IN
FINDING PETITIONER LIABLE THEREUNDER
BECAUSE THE LOSS OF THE CARGO WAS DUE
TO FORCE MAJEURE, NAMELY, HIJACKING.
III. THE RESPONDENT COURT ERRED IN
AFFIRMING THE FINDING OF THE TRIAL
COURT THAT PETITIONER'S MOTION TO
DISSOLVE/LIFT THE WRIT OF PRELIMINARY
ATTACHMENT HAS BEEN RENDERED MOOT
AND ACADEMIC BY THE DECISION OF THE
MERITS OF THE CASE." 7
The petition presents the following issues for
resolution: (1) was petitioner a common carrier?;
and (2) was the hijacking referred to a force
majeure?
The Court of Appeals, in holding that petitioner was
a common carrier, found that she admitted in her
answer that she did business under the name A.M.
Bascos Trucking and that said admission
dispensed with the presentation by private
respondent, Rodolfo Cipriano, of proofs that
petitioner was a common carrier. The respondent
Court also adopted in toto the trial court's decision
that petitioner was a common carrier, Moreover,
both courts appreciated the following pieces of
evidence as indicators that petitioner was a
common carrier: the fact that the truck driver of
petitioner, Maximo Sanglay, received the cargo
consisting of 400 bags of soya bean meal as
evidenced by a cargo receipt signed by Maximo
Sanglay; the fact that the truck helper, Juanito
Morden, was also an employee of petitioner; and
the fact that control of the cargo was placed in
petitioner's care.
In disputing the conclusion of the trial and appellate
courts that petitioner was a common carrier, she
alleged in this petition that the contract between her
and Rodolfo A. Cipriano, representing CIPTRADE,
was lease of the truck. She cited as evidence
certain affidavits which referred to the contract as
"lease". These affidavits were made by Jesus
Bascos 8 and by petitioner herself. 9 She further
averred that Jesus Bascos confirmed in his
testimony his statement that the contract was a
lease contract. 10 She also stated that: she was not
catering to the general public. Thus, in her answer
to the amended complaint, she said that she does
business under the same style of A.M. Bascos
Trucking, offering her trucks for lease to those who
have cargo to move, not to the general public but
to a few customers only in view of the fact that it is
only a small business. 11
We agree with the respondent Court in its finding
that petitioner is a common carrier.
Article 1732 of the Civil Code defines a common
carrier as "(a) person, corporation or firm, or
association engaged in the business of carrying or
transporting passengers or goods or both, by land,
water or air, for compensation, offering their
services to the public." The test to determine a
common carrier is "whether the given undertaking
is a part of the business engaged in by the carrier
which he has held out to the general public as his
occupation rather than the quantity or extent of the
business transacted." 12 In this case, petitioner
herself has made the admission that she was in the
trucking business, offering her trucks to those with
cargo to move. Judicial admissions are conclusive
and no evidence is required to prove the same. 13
But petitioner argues that there was only a contract
of lease because they offer their services only to a
select group of people and because the private
respondents, plaintiffs in the lower court, did not
object to the presentation of affidavits by petitioner
where the transaction was referred to as a lease
contract.
Regarding the first contention, the holding of the
Court in De Guzman vs. Court of Appeals 14 is
instructive. In referring to Article 1732 of the Civil
Code, it held thus:
"The above article makes no distinction between
one whose principal business activity is the
carrying of persons or goods or both, and one who
does such carrying only as an ancillary activity (in
local idiom, as a "sideline"). Article 1732 also
carefully avoids making any distinction between a
person or enterprise offering transportation service
on a regular or scheduled basis and one offering
such service on an occasional, episodic or
unscheduled basis. Neither does Article 1732
distinguish between a carrier offering its services to
the "general public," i.e., the general community or
population, and one who offers services or solicits
business only from a narrow segment of the
general population. We think that Article 1732
deliberately refrained from making such
distinctions."
Regarding the affidavits presented by petitioner to
the court, both the trial and appellate courts have
dismissed them as self-serving and petitioner
contests the conclusion. We are bound by the
appellate court's factual conclusions. Yet, granting
that the said evidence were not self-serving, the
same were not sufficient to prove that the contract
was one of lease. It must be understood that a
contract is what the law defines it to be and not
what it is called by the contracting parties. 15
Furthermore, petitioner presented no other proof of
the existence of the contract of lease. He who
alleges a fact has the burden of proving it. 16
Likewise, We affirm the holding of the respondent
court that the loss of the goods was not due to force
majeure.
Common carriers are obliged to observe
extraordinary diligence in the vigilance over the
goods transported by them. 17 Accordingly, they
are presumed to have been at fault or to have acted
negligently if the goods are lost, destroyed or
deteriorated. 18 There are very few instances when
the presumption of negligence does not attach and
these instances are enumerated in Article 1734. 19
In those cases where the presumption is applied,
the common carrier must prove that it exercised
extraordinary diligence in order to overcome the
presumption.
In this case, petitioner alleged that hijacking
constituted force majeure which exculpated her
from liability for the loss of the cargo. In De Guzman
vs. Court of Appeals, 20 the Court held that
hijacking, not being included in the provisions of
Article 1734, must be dealt with under the
provisions of Article 1735 and thus, the common
carrier is presumed to have been at fault or
negligent. To exculpate the carrier from liability
arising from hijacking, he must prove that the
robbers or the hijackers acted with grave or
irresistible threat, violence, or force. This is in
accordance with Article 1745 of the Civil Code
which provides:
"Art. 1745. Any of the following or similar
stipulations shall be considered unreasonable,
unjust and contrary to public policy;
xxx xxx xxx
(6) That the common carrier's liability for acts
committed by thieves, or of robbers who do not act
with grave or irresistible threat, violences or force,
is dispensed with or diminished;"
In the same case, 21 the Supreme Court also held
that:
"Under Article 1745 (6) above, a common carrier is
held responsible — and will not be allowed to divest
or to diminish such responsibility — even for acts of
strangers like thieves or robbers except where such
thieves or robbers in fact acted with grave or
irresistible threat, violence or force. We believe and
so hold that the limits of the duty of extraordinary
diligence in the vigilance over the goods carried are
reached where the goods are lost as a result of a
robbery which is attended by "grave or irresistible
threat, violence or force."
To establish grave and irresistible force, petitioner
presented her accusatory affidavit, 22 Jesus
Bascos' affidavit, 23 and Juanito Morden's 24
"Salaysay". However, both the trial court and the
Court of Appeals have concluded that these
affidavits were not enough to overcome the
presumption. Petitioner's affidavit about the
hijacking was based on what had been told her by
Juanito Morden. It was not a first-hand account.
While it had been admitted in court for lack of
objection on the part of private respondent, the
respondent Court had discretion in assigning
weight to such evidence. We are bound by the
conclusion of the appellate court. In a petition for
review on certiorari, We are not to determine the
probative value of evidence but to resolve
questions of law. Secondly, the affidavit of Jesus
Bascos did not dwell on how the hijacking took
place. Thirdly, while the affidavit of Juanito Morden,
the truck helper in the hijacked truck, was
presented as evidence in court, he himself was a
witness as could be gleaned from the contents of
the petition. Affidavits are not considered the best
evidence if the affiants are available as witnesses.
25 The subsequent filing of the information for
carnapping and robbery against the accused
named in said affidavits did not necessarily mean
that the contents of the affidavits were true because
they were yet to be determined in the trial of the
criminal cases.
The presumption of negligence was raised against
petitioner. It was petitioner's burden to overcome it.
Thus, contrary to her assertion, private respondent
need not introduce any evidence to prove her
negligence. Her own failure to adduce sufficient
proof of extraordinary diligence made the
presumption conclusive against her.
Having affirmed the findings of the respondent
Court on the substantial issues involved, We find
no reason to disturb the conclusion that the motion
to lift/dissolve the writ of preliminary attachment
has been rendered moot and academic by the
decision on the merits.
In the light of the foregoing analysis, it is Our
opinion that the petitioner's claim cannot be
sustained. The petition is DISMISSED and the
decision of the Court of Appeals is hereby
AFFIRMED.
SO ORDERED.
G.R. No. 141910. August 6, 2002]
FGU INSURANCE CORPORATION, petitioner,
vs. G.P. SARMIENTO TRUCKING
CORPORATION and LAMBERT M.
EROLES, respondents.
DECISION
VITUG, J.:
G.P. Sarmiento Trucking Corporation (GPS)
undertook to deliver on 18 June 1994 thirty (30)
units of Condura S.D. white refrigerators aboard
one of its Isuzu truck, driven by Lambert Eroles,
from the plant site of Concepcion Industries, Inc.,
along South Superhighway in Alabang, Metro
Manila, to the Central Luzon Appliances in
Dagupan City. While the truck was traversing the
north diversion road along McArthur highway in
Barangay Anupol, Bamban, Tarlac, it collided with
an unidentified truck, causing it to fall into a deep
canal, resulting in damage to the cargoes.
FGU Insurance Corporation (FGU), an insurer
of the shipment, paid to Concepcion Industries,
Inc., the value of the covered cargoes in the sum of
P204,450.00. FGU, in turn, being the subrogee of
the rights and interests of Concepcion Industries,
Inc., sought reimbursement of the amount it had
paid to the latter from GPS. Since the trucking
company failed to heed the claim, FGU filed a
complaint for damages and breach of contract of
carriage against GPS and its driver Lambert Eroles
with the Regional Trial Court, Branch 66, of Makati
City. In its answer, respondents asserted that GPS
was the exclusive hauler only of Concepcion
Industries, Inc., since 1988, and it was not so
engaged in business as a common
carrier. Respondents further claimed that the cause
of damage was purely accidental.
The issues having thus been joined, FGU
presented its evidence, establishing the extent of
damage to the cargoes and the amount it had paid
to the assured. GPS, instead of submitting its
evidence, filed with leave of court a motion to
dismiss the complaint by way of demurrer to
evidence on the ground that petitioner had failed to
prove that it was a common carrier.
The trial court, in its order of 30 April
1996,[1] granted the motion to dismiss, explaining
thusly:
Under Section 1 of Rule 131 of the Rules of Court,
it is provided that Each party must prove his own
affirmative allegation, xxx.
In the instant case, plaintiff did not present any
single evidence that would prove that defendant is
a common carrier.
xxxxxxxxx
Accordingly, the application of the law on common
carriers is not warranted and the presumption of
fault or negligence on the part of a common
carrier in case of loss, damage or deterioration of
goods during transport under 1735 of the Civil
Code is not availing.
Thus, the laws governing the contract between the
owner of the cargo to whom the plaintiff was
subrogated and the owner of the vehicle which
transports the cargo are the laws on obligation
and contract of the Civil Code as well as the law
on quasi delicts.
Under the law on obligation and contract,
negligence or fault is not presumed. The law on
quasi delict provides for some presumption of
negligence but only upon the attendance of some
circumstances. Thus, Article 2185 provides:
Art. 2185. Unless there is proof to the contrary, it
is presumed that a person driving a motor vehicle
has been negligent if at the time of the mishap, he
was violating any traffic regulation.
Evidence for the plaintiff shows no proof that
defendant was violating any traffic
regulation. Hence, the presumption of negligence
is not obtaining.
Considering that plaintiff failed to adduce evidence
that defendant is a common carrier and
defendants driver was the one negligent,
defendant cannot be made liable for the damages
of the subject cargoes.[2]
The subsequent motion for reconsideration
having been denied,[3] plaintiff interposed an
appeal to the Court of Appeals, contending that the
trial court had erred (a) in holding that the appellee
corporation was not a common carrier defined
under the law and existing jurisprudence; and (b) in
dismissing the complaint on a demurrer to
evidence.
The Court of Appeals rejected the appeal of
petitioner and ruled in favor of GPS. The appellate
court, in its decision of 10 June 1999, [4]discoursed,
among other things, that -
"x x x in order for the presumption of negligence
provided for under the law governing common
carrier (Article 1735, Civil Code) to arise, the
appellant must first prove that the appellee is a
common carrier. Should the appellant fail to prove
that the appellee is a common carrier, the
presumption would not arise; consequently, the
appellant would have to prove that the carrier was
negligent.
"x x x x x x x x x
"Because it is the appellant who insists that the
appellees can still be considered as a common
carrier, despite its `limited clientele, (assuming it
was really a common carrier), it follows that it
(appellant) has the burden of proving the same. It
(plaintiff-appellant) `must establish his case by a
preponderance of evidence, which means that the
evidence as a whole adduced by one side is
superior to that of the other. (Summa Insurance
Corporation vs. Court of Appeals, 243 SCRA
175). This, unfortunately, the appellant failed to do
-- hence, the dismissal of the plaintiffs complaint
by the trial court is justified.
"x x x x x x x x x
"Based on the foregoing disquisitions and
considering the circumstances that the appellee
trucking corporation has been `its exclusive
contractor, hauler since 1970, defendant has no
choice but to comply with the directive of its
principal, the inevitable conclusion is that the
appellee is a private carrier.
"x x x x x x x x x
"x x x the lower court correctly ruled that 'the
application of the law on common carriers is not
warranted and the presumption of fault or
negligence on the part of a common carrier in
case of loss, damage or deterioration of good[s]
during transport under [article] 1735 of the Civil
Code is not availing.' x x x.
"Finally, We advert to the long established rule
that conclusions and findings of fact of a trial court
are entitled to great weight on appeal and should
not be disturbed unless for strong and valid
reasons."[5]
Petitioner's motion for reconsideration was
likewise denied;[6] hence, the instant
petition,[7] raising the following issues:
I
WHETHER RESPONDENT GPS MAY BE
CONSIDERED AS A COMMON CARRIER AS
DEFINED UNDER THE LAW AND EXISTING
JURISPRUDENCE.
II
WHETHER RESPONDENT GPS, EITHER AS A
COMMON CARRIER OR A PRIVATE CARRIER,
MAY BE PRESUMED TO HAVE BEEN
NEGLIGENT WHEN THE GOODS IT
UNDERTOOK TO TRANSPORT SAFELY WERE
SUBSEQUENTLY DAMAGED WHILE IN ITS
PROTECTIVE CUSTODY AND POSSESSION.
III
WHETHER THE DOCTRINE OF RES IPSA
LOQUITUR IS APPLICABLE IN THE INSTANT
CASE.
On the first issue, the Court finds the
conclusion of the trial court and the Court of
Appeals to be amply justified. GPS, being an
exclusive contractor and hauler of Concepcion
Industries, Inc., rendering or offering its services to
no other individual or entity, cannot be considered
a common carrier. Common carriers are persons,
corporations, firms or associations engaged in the
business of carrying or transporting passengers or
goods or both, by land, water, or air, for hire or
compensation, offering their services to
the public,[8] whether to the public in general or to
a limited clientele in particular, but never on an
exclusive basis.[9] The true test of a common carrier
is the carriage of passengers or goods, providing
space for those who opt to avail themselves of its
transportation service for a fee.[10] Given accepted
standards, GPS scarcely falls within the term
common carrier.
The above conclusion nothwithstanding, GPS
cannot escape from liability.
In culpa contractual, upon which the action of
petitioner rests as being the subrogee of
Concepcion Industries, Inc., the mere proof of the
existence of the contract and the failure of its
compliance justify, prima facie, a corresponding
right of relief.[11] The law, recognizing the obligatory
force of contracts,[12] will not permit a party to be set
free from liability for any kind of misperformance of
the contractual undertaking or a contravention of
the tenor thereof.[13] A breach upon the contract
confers upon the injured party a valid cause for
recovering that which may have been lost or
suffered. The remedy serves to preserve the
interests of the promisee that may include his
expectation interest, which is his interest in having
the benefit of his bargain by being put in as good a
position as he would have been in had the contract
been performed, or his reliance interest, which is
his interest in being reimbursed for loss caused by
reliance on the contract by being put in as good a
position as he would have been in had the contract
not been made; or his restitution interest, which is
his interest in having restored to him any benefit
that he has conferred on the other party. [14] Indeed,
agreements can accomplish little, either for their
makers or for society, unless they are made the
basis for action.[15] The effect of every infraction is
to create a new duty, that is, to make recompense
to the one who has been injured by the failure of
another to observe his contractual
obligation[16] unless he can show extenuating
circumstances, like proof of his exercise of due
diligence (normally that of the diligence of a good
father of a family or, exceptionally by stipulation or
by law such as in the case of common carriers, that
of extraordinary diligence) or of the attendance of
fortuitous event, to excuse him from his ensuing
liability.
Respondent trucking corporation recognizes
the existence of a contract of carriage between it
and petitioners assured, and admits that the
cargoes it has assumed to deliver have been lost
or damaged while in its custody. In such a situation,
a default on, or failure of compliance with, the
obligation in this case, the delivery of the goods in
its custody to the place of destination - gives rise to
a presumption of lack of care and corresponding
liability on the part of the contractual obligor the
burden being on him to establish otherwise. GPS
has failed to do so.
Respondent driver, on the other hand, without
concrete proof of his negligence or fault, may not
himself be ordered to pay petitioner.The driver, not
being a party to the contract of carriage between
petitioners principal and defendant, may not be
held liable under the agreement. A contract can
only bind the parties who have entered into it or
their successors who have assumed their
personality or their juridical
position.[17] Consonantly with the axiom res inter
alios acta aliis neque nocet prodest, such contract
can neither favor nor prejudice a third
person. Petitioners civil action against the driver
can only be based on culpa aquiliana, which,
unlike culpa contractual, would require the
claimant for damages to prove negligence or fault
on the part of the defendant.[18]
A word in passing. Res ipsa loquitur, a
doctrine being invoked by petitioner, holds a
defendant liable where the thing which caused the
injury complained of is shown to be under the
latters management and the accident is such that,
in the ordinary course of things, cannot be
expected to happen if those who have its
management or control use proper care. It affords
reasonable evidence, in the absence of explanation
by the defendant, that the accident arose from want
of care.[19] It is not a rule of substantive law and, as
such, it does not create an independent ground of the appellate court are REVERSED as regards
liability. Instead, it is regarded as a mode of proof, G.P. Sarmiento Trucking Corporation which,
or a mere procedural convenience since it instead, is hereby ordered to pay FGU Insurance
furnishes a substitute for, and relieves the plaintiff Corporation the value of the damaged and lost
of, the burden of producing specific proof of cargoes in the amount of P204,450.00. No costs.
negligence. The maxim simply places on the
defendant the burden of going forward with the SO ORDERED.
proof.[20] Resort to the doctrine, however, may be
allowed only when (a) the event is of a kind which
does not ordinarily occur in the absence of
negligence; (b) other responsible causes, including
the conduct of the plaintiff and third persons, are
sufficiently eliminated by the evidence; and (c) the
indicated negligence is within the scope of the
defendant's duty to the plaintiff.[21]Thus, it is not
applicable when an unexplained accident may be
attributable to one of several causes, for some of
which the defendant could not be responsible.[22]
Res ipsa loquitur generally finds relevance
whether or not a contractual relationship exists
between the plaintiff and the defendant, for the
inference of negligence arises from the
circumstances and nature of the occurrence and
not from the nature of the relation of the
parties.[23] Nevertheless, the requirement that
responsible causes other than those due to [G.R. No. 125948. December 29, 1998]
defendants conduct must first be eliminated, for the
doctrine to apply, should be understood as being
confined only to cases of pure (non-contractual) tort
since obviously the presumption of negligence FIRST PHILIPPINE INDUSTRIAL
in culpa contractual, as previously so pointed out, CORPORATION, petitioner, vs. COURT
immediately attaches by a failure of the covenant OF APPEALS, HONORABLE PATERNO
or its tenor. In the case of the truck driver, whose V. TAC-AN, BATANGAS CITY and
liability in a civil action is predicated on culpa ADORACION C. ARELLANO, in her
acquiliana, while he admittedly can be said to have official capacity as City Treasurer of
been in control and management of the vehicle Batangas, respondents.
which figured in the accident, it is not equally
shown, however, that the accident could have been DECISION
exclusively due to his negligence, a matter that can
allow, forthwith, res ipsa loquitur to work against MARTINEZ, J.:
him.
If a demurrer to evidence is granted but on This petition for review on certiorari assails the
appeal the order of dismissal is reversed, the Decision of the Court of Appeals dated November
movant shall be deemed to have waived the right 29, 1995, in CA-G.R. SP No. 36801, affirming the
to present evidence.[24] Thus, respondent decision of the Regional Trial Court of Batangas
corporation may no longer offer proof to establish City, Branch 84, in Civil Case No. 4293, which
that it has exercised due care in transporting the dismissed petitioners' complaint for a business tax
cargoes of the assured so as to still warrant a refund imposed by the City of Batangas.
remand of the case to the trial court. Petitioner is a grantee of a pipeline concession
WHEREFORE, the order, dated 30 April 1996, under Republic Act No. 387, as amended, to
of the Regional Trial Court, Branch 66, of Makati contract, install and operate oil pipelines. The
City, and the decision, dated 10 June 1999, of the original pipeline concession was granted in
Court of Appeals, are AFFIRMED only insofar as 1967[1] and renewed by the Energy Regulatory
respondent Lambert M. Eroles is concerned, but Board in 1992.[2]
said assailed order of the trial court and decision of
 Sometime in January 1995, petitioner applied
for a mayor's permit with the Office of the Mayor of
Batangas City. However, before the mayor's permit
could be issued, the respondent City Treasurer
required petitioner to pay a local tax based on its
gross receipts for the fiscal year 1993 pursuant to
the Local Government Code.[3] The respondent
City Treasurer assessed a business tax on the
petitioner amounting to P956,076.04 payable in
four installments based on the gross receipts for
products pumped at GPS-1 for the fiscal year 1993
which amounted to P181,681,151.00. In order not
to hamper its operations, petitioner paid the tax
under protest in the amount of P239,019.01 for the
first quarter of 1993.
On January 20, 1994, petitioner filed a letter-
protest addressed to the respondent City
Treasurer, the pertinent portion of which reads:
"Please note that our Company (FPIC) is a pipeline
operator with a government concession granted
under the Petroleum Act. It is engaged in the
business of transporting petroleum products from
the Batangas refineries, via pipeline, to Sucat and
JTF Pandacan Terminals. As such, our Company
is exempt from paying tax on gross receipts under
Section 133 of the Local Government Code of 1991
xxxx
"Moreover, Transportation contractors are not
included in the enumeration of contractors under
Section 131, Paragraph (h) of the Local
Government Code. Therefore, the authority to
impose tax 'on contractors and other independent
contractors' under Section 143, Paragraph (e) of
the Local Government Code does not include the
power to levy on transportation contractors.
"The imposition and assessment cannot be
categorized as a mere fee authorized under
Section 147 of the Local Government Code. The
said section limits the imposition of fees and
charges on business to such amounts as may be
commensurate to the cost of regulation, inspection,
and licensing. Hence, assuming arguendo that
FPIC is liable for the license fee, the imposition
thereof based on gross receipts is violative of the
aforecited provision. The amount of P956,076.04
(P239,019.01 per quarter) is not commensurate to
the cost of regulation, inspection and licensing. The
fee is already a revenue raising measure, and not
a mere regulatory imposition."[4]
On March 8, 1994, the respondent City
Treasurer denied the protest contending that
petitioner cannot be considered engaged in
transportation business, thus it cannot claim
exemption under Section 133 (j) of the Local
Government Code.[5]
On June 15, 1994, petitioner filed with the
Regional Trial Court of Batangas City a
complaint[6] for tax refund with prayer for a writ of
preliminary injunction against respondents City of
Batangas and Adoracion Arellano in her capacity
as City Treasurer. In its complaint, petitioner
alleged, inter alia, that: (1) the imposition and
collection of the business tax on its gross receipts
violates Section 133 of the Local Government
Code; (2) the authority of cities to impose and
collect a tax on the gross receipts of "contractors
and independent contractors" under Sec. 141 (e)
and 151 does not include the authority to collect
such taxes on transportation contractors for, as
defined under Sec. 131 (h), the term "contractors"
excludes transportation contractors; and, (3) the
City Treasurer illegally and erroneously imposed
and collected the said tax, thus meriting the
immediate refund of the tax paid.[7]
Traversing the complaint, the respondents
argued that petitioner cannot be exempt from taxes
under Section 133 (j) of the Local Government
Code as said exemption applies only to
"transportation contractors and persons engaged in
the transportation by hire and common carriers by
air, land and water."Respondents assert that
pipelines are not included in the term "common
carrier" which refers solely to ordinary carriers such
as trucks, trains, ships and the like. Respondents
further posit that the term "common carrier" under
the said code pertains to the mode or manner by
which a product is delivered to its destination.[8]
On October 3, 1994, the trial court rendered a
decision dismissing the complaint, ruling in this
wise:
"xxx Plaintiff is either a contractor or other
independent contractor.
xxx the exemption to tax claimed by the plaintiff has
become unclear. It is a rule that tax exemptions are
to be strictly construed against the taxpayer, taxes
being the lifeblood of the government. Exemption
may therefore be granted only by clear and
unequivocal provisions of law.
"Plaintiff claims that it is a grantee of a pipeline
concession under Republic Act 387, (Exhibit A)
whose concession was lately renewed by the
Energy Regulatory Board (Exhibit B). Yet neither
said law nor the deed of concession grant any tax
exemption upon the plaintiff.
"Even the Local Government Code imposes a tax
on franchise holders under Sec. 137 of the Local
Tax Code. Such being the situation obtained in this
case (exemption being unclear and equivocal)
resort to distinctions or other considerations may
be of help:
1. That the exemption granted under Sec.
133 (j) encompasses
only common carriers so as not
to overburden the riding public or
commuters with taxes. Plaintiff is
not a common carrier, but a
special carrier extending its
services and facilities to a single
specific or "special customer"
under a "special contract."
2. The Local Tax Code of 1992 was
basically enacted to give more
and effective local autonomy to
local governments than the
previous enactments, to make
them economically and
financially viable to serve the
people and discharge their
functions with a concomitant
obligation to accept certain
devolution of powers, x x x So,
consistent with this policy even
franchise grantees are taxed
(Sec. 137) and contractors are
also taxed under Sec. 143 (e)
and 151 of the Code."[9]
Petitioner assailed the aforesaid decision
before this Court via a petition for review. On
February 27, 1995, we referred the case to the
respondent Court of Appeals for consideration and
adjudication.[10] On November 29, 1995, the
respondent court rendered a decision[11] affirming
the trial court's dismissal of petitioner's
complaint. Petitioner's motion for reconsideration
was denied on July 18, 1996.[12]
Hence, this petition. At first, the petition was
denied due course in a Resolution dated November
11, 1996.[13] Petitioner moved for a reconsideration
which was granted by this Court in a
Resolution[14] of January 20, 1997. Thus, the
petition was reinstated.
Petitioner claims that the respondent Court of
Appeals erred in holding that (1) the petitioner is not
a common carrier or a transportation contractor,
and (2) the exemption sought for by petitioner is not
clear under the law.
There is merit in the petition.
A "common carrier" may be defined, broadly,
as one who holds himself out to the public as
engaged in the business of transporting persons or
property from place to place, for compensation,
offering his services to the public generally.
Article 1732 of the Civil Code defines a
"common carrier" as "any person, corporation, firm
or association engaged in the business of carrying
or transporting passengers or goods or both, by
land, water, or air, for compensation, offering their
services to the public."
The test for determining whether a party is a
common carrier of goods is:
1. He must be engaged in the business of
carrying goods for others as a
public employment, and must hold
himself out as ready to engage in
the transportation of goods for
person generally as a business
and not as a casual occupation;
2. He must undertake to carry goods of
the kind to which his business is
confined;
3. He must undertake to carry by the
method by which his business is
conducted and over his
established roads; and
4. The transportation must be for hire.[15]
Based on the above definitions and
requirements, there is no doubt that petitioner is a
common carrier. It is engaged in the business of
transporting or carrying goods, i.e. petroleum
products, for hire as a public employment. It
undertakes to carry for all persons indifferently, that
is, to all persons who choose to employ its services,
and transports the goods by land and for
compensation. The fact that petitioner has a limited
clientele does not exclude it from the definition of a
common carrier. In De Guzman vs. Court of
Appeals[16] we ruled that:
"The above article (Art. 1732, Civil Code) makes no
distinction between one whose principal business
activity is the carrying of persons or goods or both,
and one who does such carrying only as an
ancillary activity (in local idiom, as a
'sideline'). Article 1732 x x x avoids making any
distinction between a person or enterprise
offering transportation service on a regular or
scheduled basis and one offering such service
on an occasional, episodic or unscheduled
basis. Neither does Article 1732 distinguish
between a carrier offering its services to the
'general public,' i.e., the general community or
population, and one who offers services or
solicits business only from a to utilize installations for the transportation of
narrow segment of the general population. We
think that Article 1877 deliberately refrained
from making such distinctions.
So understood, the concept of 'common carrier'
under Article 1732 may be seen to coincide neatly
with the notion of 'public service,' under the Public
Service Act (Commonwealth Act No. 1416, as
amended) which at least partially supplements the
law on common carriers set forth in the Civil
Code.Under Section 13, paragraph (b) of the Public
Service Act, 'public service' includes:
'every person that now or hereafter may own,
operate, manage, or control in the Philippines, for
hire or compensation, with general or limited
clientele, whether permanent, occasional or
accidental, and done for general business
purposes, any common carrier, railroad, street
railway, traction railway, subway motor vehicle,
either for freight or passenger, or both, with or
without fixed route and whatever may be its
classification, freight or carrier service of any class,
express service, steamboat, or steamship line,
pontines, ferries and water craft, engaged in the
transportation of passengers or freight or both,
shipyard, marine repair shop, wharf or dock, ice
plant, ice-refrigeration plant, canal, irrigation
system gas, electric light heat and power, water
supply and power petroleum, sewerage system,
wire or wireless communications systems, wire or
wireless broadcasting stations and other similar
public services.' "(Underscoring Supplied)
Also, respondent's argument that the term
"common carrier" as used in Section 133 (j) of the
Local Government Code refers only to common
carriers transporting goods and passengers
through moving vehicles or vessels either by land,
sea or water, is erroneous.
As correctly pointed out by petitioner, the
definition of "common carriers" in the Civil Code
makes no distinction as to the means of
transporting, as long as it is by land, water or air. It
does not provide that the transportation of the
passengers or goods should be by motor
vehicle. In fact, in the United States, oil pipe line
operators are considered common carriers.[17]
Under the Petroleum Act of the Philippines
(Republic Act 387), petitioner is considered a
"common carrier." Thus, Article 86 thereof provides
that:
"Art. 86. Pipe line concessionaire as a common
carrier. - A pipe line shall have the preferential right
petroleum owned by him, but is obligated to utilize
the remaining transportation capacity pro rata for
the transportation of such other petroleum as may
be offered by others for transport, and to charge
without discrimination such rates as may have
been approved by the Secretary of Agriculture and
Natural Resources."
Republic Act 387 also regards petroleum
operation as a public utility. Pertinent portion of
Article 7 thereof provides:
"that everything relating to the exploration for and
exploitation of petroleum x x and everything relating
to the manufacture, refining, storage,
or transportation by special methods of
petroleum, is hereby declared to be a public
utility." (Underscoring Supplied)
The Bureau of Internal Revenue likewise
considers the petitioner a "common carrier." In BIR
Ruling No. 069-83, it declared:
"x x x since [petitioner] is a pipeline concessionaire
that is engaged only in transporting petroleum
products, it is considered a common carrier under
Republic Act No. 387 x x x. Such being the case, it
is not subject to withholding tax prescribed by
Revenue Regulations No. 13-78, as amended."
From the foregoing disquisition, there is no
doubt that petitioner is a "common carrier" and,
therefore, exempt from the business tax as
provided for in Section 133 (j), of the Local
Government Code, to wit:
"Section 133. Common Limitations on the Taxing
Powers of Local Government Units. - Unless
otherwise provided herein, the exercise of the
taxing powers of provinces, cities, municipalities,
and barangays shall not extend to the levy of the
following :
xxxxxxxxx
(j) Taxes on the gross receipts of
transportation contractors and
 persons engaged in the
transportation of passengers or
freight by hire and common
carriers by air, land or water,
except as provided in this Code."
The deliberations conducted in the House of
Representatives on the Local Government Code of
1991 are illuminating:
"MR. AQUINO (A). Thank you, Mr. Speaker.
Mr. Speaker, we would like to proceed to page 95,
line 1. It states : "SEC.121 [now Sec. 131].
Common Limitations on the Taxing Powers of Local
Government Units." x x x
MR. AQUINO (A.). Thank you Mr. Speaker.
Still on page 95, subparagraph 5, on taxes on the
business of transportation. This appears to be one
of those being deemed to be exempted from the
taxing powers of the local government units. May
we know the reason why the transportation
business is being excluded from the taxing
powers of the local government units?
MR. JAVIER (E.). Mr. Speaker, there is an
exception contained in Section 121 (now Sec. 131),
line 16, paragraph 5. It states that local government
units may not impose taxes on the business of
transportation, except as otherwise provided in this
code.
Now, Mr. Speaker, if the Gentleman would care to
go to page 98 of Book II, one can see there that
provinces have the power to impose a tax on
business enjoying a franchise at the rate of not
more than one-half of 1 percent of the gross annual
receipts. So, transportation contractors who are
enjoying a franchise would be subject to tax by the
province. That is the exception, Mr. Speaker.
What we want to guard against here, Mr.
Speaker, is the imposition of taxes by local
government units on the carrier business. Local
government units may impose taxes on top of what
is already being imposed by the National Internal
Revenue Code which is the so-called "common
carriers tax." We do not want a duplication of
this tax, so we just provided for an
exception under Section 125 [now Sec. 137] that
a province may impose this tax at a specific rate.
MR. AQUINO (A.). Thank you for that
clarification, Mr. Speaker. x x x[18]
It is clear that the legislative intent in excluding
from the taxing power of the local government unit
the imposition of business tax against common
carriers is to prevent a duplication of the so-called
"common carrier's tax."
Petitioner is already paying three (3%) percent
common carrier's tax on its gross sales/earnings
under the National Internal Revenue Code.[19] To
tax petitioner again on its gross receipts in its
transportation of petroleum business would defeat
the purpose of the Local Government Code.
WHEREFORE, the petition is hereby
GRANTED. The decision of the respondent Court
of Appeals dated November 29, 1995 in CA-G.R.
SP No. 36801 is REVERSED and SET ASIDE.
SO ORDERED.
G.R. No. 101503 September 15, 1993
PLANTERS PRODUCTS, INC., petitioner,
vs.
COURT OF APPEALS, SORIAMONT
STEAMSHIP AGENCIES AND KYOSEI KISEN
KABUSHIKI KAISHA, respondents.
BELLOSILLO, J.:
Does a charter-party1 between a shipowner and a
charterer transform a common carrier into a private
one as to negate the civil law presumption of
negligence in case of loss or damage to its cargo?
Planters Products, Inc. (PPI), purchased from
Mitsubishi International Corporation (MITSUBISHI)
of New York, U.S.A., 9,329.7069 metric tons (M/T)
of Urea 46% fertilizer which the latter shipped in
bulk on 16 June 1974 aboard the cargo vessel M/V
"Sun Plum" owned by private respondent Kyosei
Kisen Kabushiki Kaisha (KKKK) from Kenai,
Alaska, U.S.A., to Poro Point, San Fernando, La
Union, Philippines, as evidenced by Bill of Lading
No. KP-1 signed by the master of the vessel and
issued on the date of departure.
On 17 May 1974, or prior to its voyage, a time
charter-party on the vessel M/V "Sun Plum"
pursuant to the Uniform General Charter2 was
entered into between Mitsubishi as
shipper/charterer and KKKK as shipowner, in
Tokyo, Japan.3 Riders to the aforesaid charter-
party starting from par. 16 to 40 were attached to
the pre-printed agreement. Addenda Nos. 1, 2, 3
and 4 to the charter-party were also subsequently
entered into on the 18th, 20th, 21st and 27th of May
1974, respectively.
Before loading the fertilizer aboard the vessel, four
(4) of her holds4 were all presumably inspected by
the charterer's representative and found fit to take
a load of urea in bulk pursuant to par. 16 of the
charter-party which reads:
16. . . . At loading port, notice of
readiness to be accomplished by
certificate from National Cargo
Bureau inspector or substitute
appointed by charterers for his
account certifying the vessel's
readiness to receive cargo
spaces. The vessel's hold to be
properly swept, cleaned and dried
at the vessel's expense and the
vessel to be presented clean for
use in bulk to the satisfaction of the
inspector before daytime
commences. (emphasis supplied)
After the Urea fertilizer was loaded in bulk by
stevedores hired by and under the supervision of
the shipper, the steel hatches were closed with
heavy iron lids, covered with three (3) layers of
tarpaulin, then tied with steel bonds. The hatches
remained closed and tightly sealed throughout the
entire voyage.5
Upon arrival of the vessel at her port of call on 3
July 1974, the steel pontoon hatches were opened
with the use of the vessel's boom. Petitioner
unloaded the cargo from the holds into its
steelbodied dump trucks which were parked
alongside the berth, using metal scoops attached
to the ship, pursuant to the terms and conditions of
the charter-partly (which provided for an F.I.O.S.
clause).6 The hatches remained open throughout
the duration of the discharge.7
Each time a dump truck was filled up, its load of
Urea was covered with tarpaulin before it was
transported to the consignee's warehouse located
some fifty (50) meters from the wharf. Midway to
the warehouse, the trucks were made to pass
through a weighing scale where they were
individually weighed for the purpose of ascertaining
the net weight of the cargo. The port area was
windy, certain portions of the route to the
warehouse were sandy and the weather was
variable, raining occasionally while the discharge
was in progress.8 The petitioner's warehouse was
made of corrugated galvanized iron (GI) sheets,
with an opening at the front where the dump trucks
entered and unloaded the fertilizer on the
warehouse floor. Tarpaulins and GI sheets were
placed in-between and alongside the trucks to
contain spillages of the ferilizer.9
It took eleven (11) days for PPI to unload the cargo,
from 5 July to 18 July 1974 (except July 12th, 14th
and 18th).10A private marine and cargo surveyor,
Cargo Superintendents Company Inc. (CSCI), was
hired by PPI to determine the "outturn" of the cargo
shipped, by taking draft readings of the vessel prior
to and after discharge. 11 The survey report
submitted by CSCI to the consignee (PPI) dated 19
July 1974 revealed a shortage in the cargo of
106.726 M/T and that a portion of the Urea fertilizer
approximating 18 M/T was contaminated with dirt.
The same results were contained in a Certificate of
Shortage/Damaged Cargo dated 18 July 1974
prepared by PPI which showed that the cargo
delivered was indeed short of 94.839 M/T and
about 23 M/T were rendered unfit for commerce,
having been polluted with sand, rust and
dirt. 12
Consequently, PPI sent a claim letter dated 18
December 1974 to Soriamont Steamship Agencies
(SSA), the resident agent of the carrier, KKKK, for
P245,969.31 representing the cost of the alleged
shortage in the goods shipped and the diminution
in value of that portion said to have been
contaminated with dirt. 13
Respondent SSA explained that they were not able
to respond to the consignee's claim for payment
because, according to them, what they received
was just a request for shortlanded certificate and
not a formal claim, and that this "request" was
denied by them because they "had nothing to do
with the discharge of the shipment." 14 Hence, on
18 July 1975, PPI filed an action for damages with
the Court of First Instance of Manila. The defendant
carrier argued that the strict public policy governing
common carriers does not apply to them because
they have become private carriers by reason of the
provisions of the charter-party. The court a
quo however sustained the claim of the plaintiff
against the defendant carrier for the value of the
goods lost or damaged when it ruled thus: 15
 . . . Prescinding from the provision
of the law that a common carrier is
presumed negligent in case of loss or
damage of the goods it contracts to
transport, all that a shipper has to do in a
suit to recover for loss or damage is to
show receipt by the carrier of the goods
and to delivery by it of less than what it
received. After that, the burden of proving
that the loss or damage was due to any
of the causes which exempt him from
liability is shipted to the carrier, common
or private he may be. Even if the
provisions of the charter-party
aforequoted are deemed valid, and the
defendants considered private carriers, it
was still incumbent upon them to prove
that the shortage or contamination
sustained by the cargo is attributable to
the fault or negligence on the part of the
shipper or consignee in the loading,
stowing, trimming and discharge of the
cargo. This they failed to do. By this
omission, coupled with their failure to
destroy the presumption of negligence
against them, the defendants are liable
(emphasis supplied).
On appeal, respondent Court of Appeals reversed
the lower court and absolved the carrier from
liability for the value of the cargo that was lost or
damaged. 16 Relying on the 1968 case of Home
Insurance Co. v. American Steamship Agencies,
Inc.,17 the appellate court ruled that the cargo
vessel M/V "Sun Plum" owned by private
respondent KKKK was a private carrier and not a
common carrier by reason of the time charterer-
party. Accordingly, the Civil Code provisions on
common carriers which set forth a presumption of
negligence do not find application in the case at
bar. Thus —
. . . In the absence of such presumption, it
was incumbent upon the plaintiff-appellee to
adduce sufficient evidence to prove the
negligence of the defendant carrier as
alleged in its complaint. It is an old and well
settled rule that if the plaintiff, upon whom
rests the burden of proving his cause of
action, fails to show in a satisfactory manner
the facts upon which he bases his claim, the
defendant is under no obligation to prove his
exception or defense
(Moran, Commentaries on the Rules of
Court, Volume 6, p. 2, citing Belen v. Belen,
13 Phil. 202).
But, the record shows that the plaintiff-
appellee dismally failed to prove the basis of
its cause of action, i.e. the alleged
negligence of defendant carrier. It appears
that the plaintiff was under the impression
that it did not have to establish defendant's
negligence. Be that as it may, contrary to the
trial court's finding, the record of the instant
case discloses ample evidence showing that
defendant carrier was not negligent in
performing its obligation . . . 18 (emphasis
supplied).
Petitioner PPI appeals to us by way of a petition for
review assailing the decision of the Court of
Appeals. Petitioner theorizes that the Home
Insurance case has no bearing on the present
controversy because the issue raised therein is the
validity of a stipulation in the charter-party
delimiting the liability of the shipowner for loss or
damage to goods cause by want of due deligence
on its part or that of its manager to make the vessel
seaworthy in all respects, and not whether the
presumption of negligence provided under the Civil
Code applies only to common carriers and not to
private carriers. 19 Petitioner further argues that
since the possession and control of the vessel
remain with the shipowner, absent any stipulation
to the contrary, such shipowner should made liable
for the negligence of the captain and crew. In fine,
PPI faults the appellate court in not applying the
presumption of negligence against respondent
carrier, and instead shifting the onus probandi on
the shipper to show want of due deligence on the
part of the carrier, when he was not even at hand
to witness what transpired during the entire voyage.
As earlier stated, the primordial issue here is
whether a common carrier becomes a private
carrier by reason of a charter-party; in the negative,
whether the shipowner in the instant case was able
to prove that he had exercised that degree of
diligence required of him under the law.
It is said that etymology is the basis of reliable
judicial decisions in commercial cases. This being
so, we find it fitting to first define important terms
which are relevant to our discussion.
A "charter-party" is defined as a contract by which
an entire ship, or some principal part thereof, is let
by the owner to another person for a specified time
or use; 20 a contract of affreightment by which the
owner of a ship or other vessel lets the whole or a
part of her to a merchant or other person for the
conveyance of goods, on a particular voyage, in
consideration of the payment of freight; 21 Charter
parties are of two types: (a) contract of
affreightment which involves the use of shipping
space on vessels leased by the owner in part or as
a whole, to carry goods for others; and, (b) charter
by demise or bareboat charter, by the terms of
which the whole vessel is let to the charterer with a
transfer to him of its entire command and
possession and consequent control over its
navigation, including the master and the crew, who
are his servants. Contract of affreightment may
either be time charter, wherein the vessel is leased
to the charterer for a fixed period of time, or voyage
charter, wherein the ship is leased for a single
voyage. 22 In both cases, the charter-party provides
for the hire of vessel only, either for a determinate
period of time or for a single or consecutive voyage,
the shipowner to supply the ship's stores, pay for
the wages of the master and the crew, and defray
the expenses for the maintenance of the ship.
Upon the other hand, the term "common or public
carrier" is defined in Art. 1732 of the Civil
Code. 23 The definition extends to carriers either by
land, air or water which hold themselves out as
ready to engage in carrying goods or transporting
passengers or both for compensation as a public
employment and not as a casual occupation. The
distinction between a "common or public carrier"
and a "private or special carrier" lies in the
character of the business, such that if the
undertaking is a single transaction, not a part of the
general business or occupation, although involving
the carriage of goods for a fee, the person or
corporation offering such service is a private
carrier. 24
Article 1733 of the New Civil Code mandates that
common carriers, by reason of the nature of their
business, should observe extraordinary diligence in
the vigilance over the goods they carry.25 In the
case of private carriers, however, the exercise of
ordinary diligence in the carriage of goods will
suffice. Moreover, in the case of loss, destruction
or deterioration of the goods, common carriers are
presumed to have been at fault or to have acted
negligently, and the burden of proving otherwise
rests on them.26 On the contrary, no such
presumption applies to private carriers, for
whosoever alleges damage to or deterioration of
the goods carried has the onus of proving that the
cause was the negligence of the carrier.
It is not disputed that respondent carrier, in the
ordinary course of business, operates as a
common carrier, transporting goods
indiscriminately for all persons. When petitioner
chartered the vessel M/V "Sun Plum", the ship
captain, its officers and compliment were under the
employ of the shipowner and therefore continued to
be under its direct supervision and control. Hardly
then can we charge the charterer, a stranger to the
crew and to the ship, with the duty of caring for his
cargo when the charterer did not have any control
of the means in doing so. This is evident in the
present case considering that the steering of the
ship, the manning of the decks, the determination
of the course of the voyage and other technical
incidents of maritime navigation were all consigned
to the officers and crew who were screened,
chosen and hired by the shipowner. 27
It is therefore imperative that a public carrier shall
remain as such, notwithstanding the charter of the
whole or portion of a vessel by one or more
persons, provided the charter is limited to the ship
only, as in the case of a time-charter or voyage-
charter. It is only when the charter includes both the
vessel and its crew, as in a bareboat or demise that
a common carrier becomes private, at least insofar
as the particular voyage covering the charter-party
is concerned. Indubitably, a shipowner in a time or
voyage charter retains possession and control of
the ship, although her holds may, for the moment,
be the property of the charterer. 28
Respondent carrier's heavy reliance on the case
of Home Insurance Co. v. American Steamship
Agencies, supra, is misplaced for the reason that
the meat of the controversy therein was the validity
of a stipulation in the charter-party exempting the
shipowners from liability for loss due to the
negligence of its agent, and not the effects of a
special charter on common carriers. At any rate,
the rule in the United States that a ship chartered
by a single shipper to carry special cargo is not a
common carrier, 29 does not find application in our
jurisdiction, for we have observed that the growing
concern for safety in the transportation of
passengers and /or carriage of goods by sea
requires a more exacting interpretation of admiralty
laws, more particularly, the rules governing
common carriers.
We quote with approval the observations of Raoul
Colinvaux, the learned barrister-at-law 30 —
As a matter of principle, it is difficult to
find a valid distinction between cases in
which a ship is used to convey the
goods of one and of several persons.
Where the ship herself is let to a
charterer, so that he takes over the
 charge and control of her, the case is
different; the shipowner is not then a
carrier. But where her services only are
let, the same grounds for imposing a
strict responsibility exist, whether he is
employed by one or many. The master
and the crew are in each case his
servants, the freighter in each case is
usually without any representative on
board the ship; the same opportunities
for fraud or collusion occur; and the
same difficulty in discovering the truth
as to what has taken place arises . . .
In an action for recovery of damages against a
common carrier on the goods shipped, the shipper
or consignee should first prove the fact of shipment
and its consequent loss or damage while the same
was in the possession, actual or constructive, of the
carrier. Thereafter, the burden of proof shifts to
respondent to prove that he has exercised
extraordinary diligence required by law or that the
loss, damage or deterioration of the cargo was due
to fortuitous event, or some other circumstances
inconsistent with its liability. 31
To our mind, respondent carrier has sufficiently
overcome, by clear and convincing proof, the prima
faciepresumption of negligence.
The master of the carrying vessel, Captain Lee Tae
Bo, in his deposition taken on 19 April 1977 before
the Philippine Consul and Legal Attache in the
Philippine Embassy in Tokyo, Japan, testified that
before the fertilizer was loaded, the four (4) hatches
of the vessel were cleaned, dried and fumigated.
After completing the loading of the cargo in bulk in
the ship's holds, the steel pontoon hatches were
closed and sealed with iron lids, then covered with
three (3) layers of serviceable tarpaulins which
were tied with steel bonds. The hatches remained
close and tightly sealed while the ship was in transit
as the weight of the steel covers made it impossible
for a person to open without the use of the ship's
boom. 32
It was also shown during the trial that the hull of the
vessel was in good condition, foreclosing the
possibility of spillage of the cargo into the sea or
seepage of water inside the hull of the
vessel. 33 When M/V "Sun Plum" docked at its
berthing place, representatives of the consignee
boarded, and in the presence of a representative of
the shipowner, the foreman, the stevedores, and a
cargo surveyor representing CSCI, opened the
hatches and inspected the condition of the hull of
the vessel. The stevedores unloaded the cargo
under the watchful eyes of the shipmates who were
overseeing the whole operation on rotation basis. 34
Verily, the presumption of negligence on the part of
the respondent carrier has been efficaciously
overcome by the showing of extraordinary zeal and
assiduity exercised by the carrier in the care of the
cargo. This was confirmed by respondent appellate
court thus —
. . . Be that as it may, contrary to the trial
court's finding, the record of the instant
case discloses ample evidence showing
that defendant carrier was not negligent in
performing its obligations. Particularly, the
following testimonies of plaintiff-appellee's
own witnesses clearly show absence of
negligence by the defendant carrier; that
the hull of the vessel at the time of the
discharge of the cargo was sealed and
nobody could open the same except in the
presence of the owner of the cargo and the
representatives of the vessel (TSN, 20 July
1977, p. 14); that the cover of the hatches
was made of steel and it was overlaid with
tarpaulins, three layers of tarpaulins and
therefore their contents were protected
from the weather (TSN, 5 April 1978, p. 24);
and, that to open these hatches, the seals
would have to be broken, all the seals were
found to be intact (TSN, 20 July 1977, pp.
15-16) (emphasis supplied).
The period during which private respondent was to
observe the degree of diligence required of it as a
public carrier began from the time the cargo was
unconditionally placed in its charge after the
vessel's holds were duly inspected and passed
scrutiny by the shipper, up to and until the vessel
reached its destination and its hull was reexamined
by the consignee, but prior to unloading. This is
clear from the limitation clause agreed upon by the
parties in the Addendum to the standard
"GENCON" time charter-party which provided for
an F.I.O.S., meaning, that the loading, stowing,
trimming and discharge of the cargo was to be done
by the charterer, free from all risk and expense to
the carrier. 35 Moreover, a shipowner is liable for
damage to the cargo resulting from improper
stowage only when the stowing is done by
stevedores employed by him, and therefore under
his control and supervision, not when the same is
done by the consignee or stevedores under the
employ of the latter. 36
Article 1734 of the New Civil Code provides that
common carriers are not responsible for the loss,
destruction or deterioration of the goods if caused
by the charterer of the goods or defects in the
packaging or in the containers. The Code of
Commerce also provides that all losses and
deterioration which the goods may suffer during the
transportation by reason of fortuitous event, force
majeure, or the inherent defect of the goods, shall
be for the account and risk of the shipper, and that
proof of these accidents is incumbent upon the
carrier. 37 The carrier, nonetheless, shall be liable
for the loss and damage resulting from the
preceding causes if it is proved, as against him, that
they arose through his negligence or by reason of
his having failed to take the precautions which
usage has established among careful persons. 38
Respondent carrier presented a witness who
testified on the characteristics of the fertilizer
shipped and the expected risks of bulk shipping.
Mr. Estanislao Chupungco, a chemical engineer
working with Atlas Fertilizer, described Urea as a
chemical compound consisting mostly of ammonia
and carbon monoxide compounds which are used
as fertilizer. Urea also contains 46% nitrogen and
is highly soluble in water. However, during storage,
nitrogen and ammonia do not normally evaporate
even on a long voyage, provided that the
temperature inside the hull does not exceed eighty
(80) degrees centigrade. Mr. Chupungco further
added that in unloading fertilizer in bulk with the use
of a clamped shell, losses due to spillage during
such operation amounting to one percent (1%)
against the bill of lading is deemed "normal" or
"tolerable." The primary cause of these spillages is
the clamped shell which does not seal very tightly.
Also, the wind tends to blow away some of the
materials during the unloading process.
The dissipation of quantities of fertilizer, or its
daterioration in value, is caused either by an
extremely high temperature in its place of storage,
or when it comes in contact with water. When Urea
is drenched in water, either fresh or saline, some of
its particles dissolve. But the salvaged portion
which is in liquid form still remains potent and
usable although no longer saleable in its original
market value.
The probability of the cargo being damaged or
getting mixed or contaminated with foreign particles
was made greater by the fact that the fertilizer was
transported in "bulk," thereby exposing it to the
inimical effects of the elements and the grimy
condition of the various pieces of equipment used
in transporting and hauling it.
The evidence of respondent carrier also showed
that it was highly improbable for sea water to seep
into the vessel's holds during the voyage since the
hull of the vessel was in good condition and her
hatches were tightly closed and firmly sealed,
making the M/V "Sun Plum" in all respects
seaworthy to carry the cargo she was chartered for.
If there was loss or contamination of the cargo, it
was more likely to have occurred while the same
was being transported from the ship to the dump
trucks and finally to the consignee's warehouse.
This may be gleaned from the testimony of the
marine and cargo surveyor of CSCI who
supervised the unloading. He explained that the 18
M/T of alleged "bar order cargo" as contained in
their report to PPI was just an approximation or
estimate made by them after the fertilizer was
discharged from the vessel and segregated from
the rest of the cargo.
The Court notes that it was in the month of July
when the vessel arrived port and unloaded her
cargo. It rained from time to time at the harbor area
while the cargo was being discharged according to
the supply officer of PPI, who also testified that it
was windy at the waterfront and along the shoreline
where the dump trucks passed enroute to the
consignee's warehouse.
Indeed, we agree with respondent carrier that bulk
shipment of highly soluble goods like fertilizer
carries with it the risk of loss or damage. More so,
with a variable weather condition prevalent during
its unloading, as was the case at bar. This is a risk
the shipper or the owner of the goods has to face.
Clearly, respondent carrier has sufficiently proved
the inherent character of the goods which makes it
highly vulnerable to deterioration; as well as the
inadequacy of its packaging which further
contributed to the loss. On the other hand, no proof
was adduced by the petitioner showing that the
carrier was remise in the exercise of due diligence
in order to minimize the loss or damage to the
goods it carried.
WHEREFORE, the petition is DISMISSED. The
assailed decision of the Court of Appeals, which
reversed the trial court, is AFFIRMED.
Consequently, Civil Case No. 98623 of the then
Court of the First Instance, now Regional Trial
Court, of Manila should be, as it is
hereby DISMISSED.
Costs against petitioner.
SO ORDERED.
 LOADSTAR G.R. No. 157481
SHIPPING CO., INC.,
Petitioner,
- versus -
PIONEER ASIA Promulgated:
INSURANCE CORP.,
Respondent. January 24, 2006
x- - - - - - - - - - - - - - - -- - - - - - - - - - - - - - - -x
DECISION
QUISUMBING, J.:
For review on certiorari are (1)
the Decision[1] dated October 15, 2002 and (2)
the Resolution[2] dated February 27, 2003, of the
Court of Appeals in CA-G.R. CV No. 40999, which
affirmed with modification the Decision[3] dated
February 15, 1993 of the Regional Trial Court of
Manila, Branch 8 in Civil Case No. 86-37957.
The pertinent facts are as follows:
Petitioner Loadstar Shipping Co., Inc.
(Loadstar for brevity) is the registered owner and
operator of the vessel M/V Weasel. It holds office
at 1294 Romualdez St., Paco, Manila.
On June 6, 1984, Loadstar entered into a
voyage-charter with Northern Mindanao Transport
Company, Inc. for the carriage of 65,000 bags of
cement from Iligan City to Manila. The shipper was
Iligan Cement Corporation, while the consignee
in Manila was Market Developers, Inc.
On June 24, 1984, 67,500 bags of cement
were loaded on board M/V Weasel and stowed in
the cargo holds for delivery to the consignee. The
shipment was covered by petitioners Bill of
Lading[4] dated June 23, 1984.
Prior to the voyage, the consignee insured
the shipment of cement with respondent Pioneer
Asia Insurance Corporation for P1,400,000, for
which respondent issued Marine Open Policy No.
MOP-006 dated September 17, 1980, covering all
shipments made on or after September 30, 1980.[5]
At 12:50 in the afternoon of June 24,
1984, M/V Weasel left Iligan City for Manila in
good weather. However, at 4:31 in the morning
of June 25, 1984, Captain Vicente C. Montera,
master of M/V Weasel, ordered the vessel to be
forced aground. Consequently, the entire shipment
of cement was good as gone due to exposure to
sea water. Petitioner thus failed to deliver the
goods to the consignee in Manila.
The consignee demanded from petitioner
full reimbursement of the cost of the lost shipment.
Petitioner, however, refused to reimburse the
consignee despite repeated demands.
Nonetheless, on March 11, 1985,
respondent insurance company paid the
consignee P1,400,000 plus an additional amount
of P500,000, the value of the lost shipment of
cement. In return, the consignee executed a Loss
and Subrogation Receipt in favor of respondent
concerning the latters subrogation rights against
petitioner.
Hence, on October 15, 1986, respondent
filed a complaint docketed as Civil Case No. 86-
37957, against petitioner with the Regional Trial
Court of Manila, Branch 8. It alleged that: (1)
the M/V Weasel was not seaworthy at the
commencement of the voyage; (2) the weather and
sea conditions then prevailing were usual and
expected for that time of the year and as such, was
an ordinary peril of the voyage for which the M/V
Weasel should have been normally able to cope
with; and (3) petitioner was negligent in the
selection and supervision of its agents and
employees then manning the M/V Weasel.
In its Answer, petitioner alleged that no
fault nor negligence could be attributed to it
because it exercised due diligence to make the ship
seaworthy, as well as properly manned and
equipped. Petitioner insisted that the failure to
deliver the subject cargo to the consignee was due
to force majeure. Petitioner claimed it could not be
held liable for an act or omission not directly
attributable to it.
On February 15, 1993, the RTC rendered
a Decision in favor of respondent, to wit:
WHEREFORE, in view of
the foregoing, judgment is hereby
rendered in favor of plaintiff and
against defendant Loadstar
Shipping Co., Inc. ordering the
latter to pay as follows:
 1. To pay plaintiff the fees and litigation expenses. Costs
sum of P1,900,000.00 with legal against the appellant.
rate of interest per annum from
date of complaint until fully paid; SO ORDERED.[7]

2. To pay the sum

equal to 25% of the claim as and Petitioners Motion for Reconsideration was
for attorneys fees and litigation denied.[8]
expenses; and,
The instant petition is anchored now on the
3. To pay the costs of following assignments of error:
suit. I

IT IS SO ORDERED.[6] THE HONORABLE COURT OF

APPEALS ERRED IN HOLDING
THAT PETITIONER IS A
COMMON CARRIER UNDER
The RTC reasoned that petitioner, as a
ARTICLE 1732 OF THE CIVIL
common carrier, bears the burden of proving that it
CODE.
exercised extraordinary diligence in its vigilance
over the goods it transported. The trial court
II
explained that in case of loss or destruction of the
goods, a statutory presumption arises that the ASSUMING ARGUENDO THAT
common carrier was negligent unless it could prove PETITIONER IS A COMMON
that it had observed extraordinary diligence. CARRIER, THE HONORABLE
COURT OF APPEALS ERRED IN
Petitioners defense of force majeure was HOLDING THAT THE
found bereft of factual basis. The RTC called PROXIMATE CAUSE OF THE
attention to the PAG-ASA report that at the time of LOSS OF CARGO WAS NOT A
the incident, tropical storm Asiang had moved FORTUITOUS EVENT BUT WAS
away from the Philippines. Further, records ALLEGEDLY DUE TO THE
showed that the sea and weather conditions in the FAILURE OF PETITIONER TO
area of Hinubaan, Negros Occidental from 8:00 EXERCISE EXTRAORDINARY
p.m. of June 24, 1984 to 8:00 a.m. the next day DILIGENCE.
were slight and smooth. Thus, the trial court
concluded that the cause of the loss was not III
tropical storm Asiang or any other force majeure,
but gross negligence of petitioner. THE HONORABLE COURT OF
APPEALS ERRED IN AFFIRMING
THE AWARD BY THE TRIAL
Petitioner appealed to the Court of
COURT OF ATTORNEYS FEES
Appeals.
AND LITIGATION EXPENSES IN
FAVOR OF HEREIN
In its Decision dated October 15, 2002, the
RESPONDENT.[9]
Court of Appeals affirmed the RTC Decision with
modification that Loadstar shall only pay the sum of
10% of the total claim for attorneys fees and
On the first and second issues, petitioner
litigation expenses. It ruled,
contends that at the time of the voyage the carriers
WHEREFORE, premises
voyage-charter with the shipper converted it into a
considered, the Decision dated
private carrier. Thus, the presumption of
February 15, 1993, of the Regional
Trial Court of Manila, National negligence against common carriers could not
Capital Judicial Region, Branch 8, apply. Petitioner further avers that the stipulation in
the voyage-charter holding it free from liability is
in Civil Case No. 86-37957 is
valid and binds the respondent. In any event,
hereby AFFIRMED with the
petitioner insists that it had exercised extraordinary
MODIFICATION that the appellant
shall only pay the sum of 10% of diligence and that the proximate cause of the loss
the total claim as and for attorneys of the cargo was a fortuitous event.
 With regard to the third issue, petitioner
points out that the award of attorneys fees and
litigation expenses appeared only in the dispositive
portion of the RTC Decision with nary a justification.
Petitioner maintains that the Court of Appeals thus
erred in affirming the award.
For its part, respondent dismisses as
factual issues the inquiry on (1) whether the loss of
the cargo was due to force majeure or due to
petitioners failure to exercise extraordinary
diligence; and (2) whether respondent is entitled to
recover attorneys fees and expenses of litigation.
Respondent further counters that the Court
of Appeals was correct when it held that petitioner
was a common carrier despite the charter of the
whole vessel, since the charter was limited to the
ship only.
Prefatorily, we stress that the finding of fact
by the trial court, when affirmed by the Court of
Appeals, is not reviewable by this Court in a petition
for review on certiorari. However, the
conclusions derived from such factual finding are
not necessarily pure issues of fact when they are
inextricably intertwined with the determination of a
legal issue. In such instances, the conclusions
made may be raised in a petition for review before
this Court.[10]
The threshold issues in this case are: (1)
Given the circumstances of this case, is petitioner
a common or a private carrier? and (2) In either
case, did petitioner exercise the required
diligence i.e., the extraordinary diligence of a
common carrier or the ordinary diligence of a
private carrier?
Article 1732 of the Civil Code defines a
common carrier as follows:
Article 1732. Common carriers are
persons, corporations, firms or
associations engaged in the
business of carrying or
transporting passengers or goods
or both, by land, water, or air, for
compensation, offering their
services to the public.
Petitioner is a corporation engaged in the business
of transporting cargo by water and for
compensation, offering its services indiscriminately
to the public. Thus, without doubt, it is a common
carrier. However, petitioner entered into a voyage-
charter with the Northern Mindanao Transport
Company, Inc. Now, had the voyage-charter
converted petitioner into a private carrier?
We think not. The voyage-charter agreement
between petitioner and Northern Mindanao
Transport Company, Inc. did not in any way convert
the common carrier into a private carrier. We have
already resolved this issue with finality in Planters
Products, Inc. v. Court of Appeals[11] where we
ruled that:
It is therefore imperative
that a public carrier shall remain as
such, notwithstanding the charter
of the whole or portion of a vessel
by one or more persons, provided
the charter is limited to the ship
only, as in the case of a time-
charter or voyage-charter. It is only
when the charter includes both the
vessel and its crew, as in a
bareboat or demise that a common
carrier becomes private, at least
insofar as the particular voyage
covering the charter-party is
concerned. Indubitably, a
shipowner in a time or voyage
charter retains possession and
control of the ship, although her
holds may, for the moment, be the
property of the charterer.[12]
Conformably, petitioner remains a
common carrier notwithstanding the existence of
the charter agreement with the Northern Mindanao
Transport Company, Inc. since the said charter is
limited to the ship only and does not involve both
the vessel and its crew. As elucidated in Planters
Products, its charter is only a voyage-charter, not a
bareboat charter.
As a common carrier, petitioner is required
to observe extraordinary diligence in the vigilance
over the goods it transports.[13] When the goods
placed in its care are lost, petitioner is presumed to
have been at fault or to have acted negligently.
Petitioner therefore has the burden of proving that
it observed extraordinary diligence in order to avoid
responsibility for the lost cargo.[14]
In Compania Maritima v. Court of
Appeals,[15] we said:
it is incumbent upon the
common carrier to prove that the
loss, deterioration or destruction
was due to accident or some other
 circumstances inconsistent with its
liability.
...
The extraordinary
diligence in the vigilance over the
goods tendered for shipment
requires the common carrier to
know and to follow the required
precaution for avoiding damage to,
or destruction of the goods
entrusted to it for safe carriage and
delivery. It requires common
carriers to render service with the
greatest skill and foresight and to
use all reasonable means to
ascertain the nature and
characteristics of goods tendered
for shipment, and to exercise due
care in the handling and stowage,
including such methods as their
nature requires.[16]
Article 1734 enumerates the instances
when a carrier might be exempt from liability for the
loss of the goods. These are:
(1) Flood, storm, earthquake,
lightning, or other natural
disaster or calamity;
(2) Act of the public enemy in war,
whether international or civil;
(3) Act or omission of the shipper
or owner of the goods;
(4) The character of the goods or
defects in the packing or in the
containers; and
(5) Order or act of competent
public authority.[17]
Petitioner claims that the loss of the goods
was due to a fortuitous event under paragraph 1.
Yet, its claim is not substantiated. On the contrary,
we find supported by evidence on record the
conclusion of the trial court and the Court of
Appeals that the loss of the entire shipment of
cement was due to the gross negligence of
petitioner.
Records show that in the evening of June
24, 1984, the sea and weather conditions in the
vicinity of Negros Occidental were calm. The
records reveal that petitioner took a shortcut route,
instead of the usual route, which exposed the
voyage to unexpected hazard. Petitioner has only
itself to blame for its misjudgment.
Petitioner heavily relies on Home
Insurance Co. v. American Steamship Agencies,
Inc.[18] and Valenzuela Hardwood and Industrial
Supply, Inc. v. Court of Appeals.[19] The said cases
involved a private carrier, not a common carrier.
Moreover, the issue in both cases is not the effect
of a voyage-charter on a common carrier, but the
validity of a stipulation absolving the private carrier
from liability in case of loss of the cargo attributable
to the negligence of the private carrier.
Lastly, on the third issue, we find
consistent with law and prevailing jurisprudence the
Court of Appeals award of attorneys fees and
expenses of litigation equivalent to ten percent
(10%) of the total claim. The contract between the
parties in this case contained a stipulation that in
case of suit, attorneys fees and expenses of
litigation shall be limited to only ten percent (10%)
of the total monetary award. Given the
circumstances of this case, we deem the said
amount just and equitable.
WHEREFORE, the petition is DENIED.
The assailed Decision dated October 15, 2002 and
the Resolution dated February 27, 2003, of the
Court of Appeals in CA-G.R. CV No. 40999,
are AFFIRMED.
Costs against petitioner.
SO ORDERED.
G.R. No. 98275 November 13, 1992
BA FINANCE CORPORATION, petitioner,
vs.
HON. COURT OF APPEALS, REGIONAL TRIAL
COURT OF ANGELES CITY, BRANCH LVI,
CARLOS OCAMPO, INOCENCIO TURLA,
SPOUSES MOISES AGAPITO and SOCORRO
M. AGAPITO and NICOLAS CRUZ, respondents.
MELO, J.:
The question of petitioner's responsibility for
damages when on March 6, 1983, an accident
occurred involving petitioner's Isuzu ten-wheeler
truck then driven by an employee of Lino Castro is
the thrust of the petition for review on certiorari now
before Us considering that neither the driver nor
Lino Castro appears to be connected with
petitioner.
On October 13, 1988, the disputed decision in the
suit below was rendered by the court of origin in this
manner:
1. Ordering Rock B.A. and Rogelio Villar
y Amare jointly and severally to pay the
plaintiffs as follows:
a) To the plaintiff Carlos Ocampo —
P121,650.00;
b) To the plaintiff Moises Ocampo —
P298,500.00
c) To the plaintiff Nicolas Cruz —
P154,740.00
d) To the plaintiff Inocencio Turla, Sr. —
48,000.00
2. Dismissing the case against Lino
Castro
3. Dismissing the third-party complaint
against STRONGHOLD
4. Dismissing all the counterclaim of the
defendants and third-party defendants.
5. Ordering ROCK to reimburse B.A. the
total amount of P622,890.00 which the
latter is adjudged to pay to the plaintiffs.
(p. 46, Rollo)
Respondent Court of Appeals affirmed the
appealed disposition in toto through Justice Rasul,
with Justices De Pano, Jr. and Imperial concurring,
on practically the same grounds arrived at by the
court a quo (p. 28, Rollo). Efforts exerted towards
re-evaluation of the adverse were futile (p.
37, Rollo). Hence, the instant petition.
The lower court ascertained after due trial that
Rogelio Villar y Amare, the driver of the Isuzu truck,
was at fault when the mishap occurred in as much
as he was found guilty beyond reasonable doubt of
reckless imprudence resulting in triple homicide
with multiple physical injuries with damage to
property in a decision rendered on February 16,
1984 by the Presiding Judge of Branch 6 of the
Regional Trial Court stationed at Malolos, Bulacan.
Petitioner was adjudged liable for damages in as
much as the truck was registered in its name during
the incident in question, following the doctrine laid
down by this Court in Perez vs. Gutierrez (53
SCRA 149 [1973]) and Erezo, et al. vs. Jepte (102
Phil. 103 [1957]). In the same breadth, Rock
Component Philippines, Inc. was ordered to
reimburse petitioner for any amount that the latter
may be adjudged liable to pay herein private
respondents as expressly stipulated in the contract
of lease between petitioner and Rock Component
Philippines, Inc. Moreover, the trial court applied
Article 2194 of the new Civil Code on solidary
accountability of join tortfeasors insofar as the
liability of the driver, herein petitioner and Rock
Component Philippines was concerned (pp. 6-7,
Decision; pp. 44-45, Rollo).
To the question of whether petitioner can be held
responsible to the victim albeit the truck was leased
to Rock Component Philippines when the incident
occurred, the appellate court answered in the
affirmative on the basis of the jurisprudential
dogmas which, as aforesaid, were relied upon by
the trial court although respondent court was quick
to add the caveat embodied in the lease covenant
between petitioner and Rock Component
Philippines relative to the latter's duty to reimburse
any amount which may be adjudged against
petitioner (pp. 32-33, Rollo).
Petitioner asseverates that it should not have been
haled to court and ordered to respond for the
damage in the manner arrived at by both the trial
and appellate courts since paragraph 5 of the
complaint lodged by the plaintiffs below would
indicate that petitioner was not the employer of the
negligent driver who was under the control an
supervision of Lino Castro at the time of the
accident, apart from the fact that the Isuzu truck
was in the physical possession of Rock Component
Philippines by virtue of the lease agreement.
Aside from casting clouds of doubt on the propriety
of invoking the Perez and Erezo doctrines,
petitioner continue to persist with the idea that the
pronouncements of this Court in Duavit vs. Court of
Appeals (173 SCRA 490 [1989]) and Duquillo vs.
Bayot (67 Phil 131 [1939]) dovetail with the factual
and legal scenario of the case at hand.
Furthermore, petitioner assumes, given the so-
called hiatus on the basis for the award of damages
as decreed by the lower and appellate courts, that
Article 2180 of the new Civil Code on vicarious
liability will divest petitioner of any responsibility
absent as there is any employer-employee
relationship between petitioner and the driver.
Contrary to petitioner's expectations, the recourse
instituted from the rebuffs it encountered may not
constitute a sufficient foundation for reversal of the
impugned judgment of respondent court. Petitioner
is of the impression that
the Perez and Erezo cases are inapplicable due to
the variance of the generative facts in said cases
as against those obtaining in the controversy at bar.
A contrario, the lesson imparted by Justice
Labrador in Erezo is still good law, thus:
. . . In previous decisions, We already have
held that the registered owner of a
certificate of public convenience is liable to
the public for the injuries or damages
suffered by passengers or third persons
caused by the operation of said vehicle,
even though the same had been
transferred to a third person. (Montoya vs.
Ignacio, 94 Phil., 182 50 Off. Gaz., 108;
Roque vs. Malibay Transit, Inc., G.R. No.
L-8561, November 18, 1955; Vda. de
Medina vs. Cresencia, 99 Phil., 506, 52 Off.
Gaz., [10], 4606.) The principle upon which
this doctrine is based is that in dealing with
vehicles registered under the Public
Service Law, the public has the right to
assume or presumed that the registered
owner is the actual owner thereof, for it
would be difficult with the public to enforce
the actions that they may have for injuries
caused to them by the vehicles being
negligently operated if the public should be
required to prove who actual the owner is.
How would the public or third persons know
against whom to enforce their rights in case
of subsequent transfer of the vehicles? We
do not imply by this doctrine, however, that
the registered owner may not recover
whatever amount he had paid by virtue of
his liability to third persons from the person
to whom he had actually sold, assigned or
conveyed the vehicle.
Under the same principle the registered
owner of any vehicle, even if not used
for a public service, should primarily
responsible to the public or to the third
persons for injuries caused the latter
while the vehicle is being driven on the
highways or streets. The members of
the Court are in agreement that the
defendant-appellant should be held
liable to plaintiff-appellee for the injuries
occasioned to the latter because of the
negligence of the driver, even if the
defendant-appellant was no longer an
owner of the vehicle at the time of the
damage because he had previously
sold it to another. What is the legal basis
for his (defendants-appellant's) liability?
There is a presumption that the owner
of the guilty vehicle is the defendant-
appellant as he is the registered owner
in the Motor Vehicle Office. Should he
not be allowed to prove the truth, that he
had sold it to another and thus shift the
responsibility for the injury to the real
and the actual owner? The defendants
hold the affirmative of this proposition;
the trial court hold the negative.
The Revised Motor Vehicle Law (Act
No. 3992, as amended) provides that
the vehicle may be used or operated
upon any public highway unless the
same is properly registered. It has been
stated that the system of licensing and
the requirement that each machine
must carry a registration number,
conspicuously displayed, is one of the
precautions taken to reduce the danger
of injury of pedestrians and other
travelers from the careless
management of automobiles, and to
furnish a means of ascertaining the
identity of persons violating the laws
and ordinances, regulating the speed
and operation of machines upon the
highways (2 R. C. L. 1176). Not only are
vehicles to be registered and that no
motor vehicles are to be used or
operated without being properly
registered from the current year, furnish
the Motor Vehicle Office a report
showing the name and address of each
purchaser of motor vehicle during the
previous month and the manufacturer's
serial number and motor number.
(Section 5[c], Act No. 3992, as
amended.)
Registration is required not to make
said registration the operative act by
which ownership in vehicles is
transferred, as in land registration
cases, because the administrative
proceeding of registration does not
bear any essential relation to the
contract of sale between the parties
(Chinchilla vs. Rafael and Verdaguer,
39 Phil. 888), but to permit the use and
operation of the vehicle upon any
public highway (section 5[a], Act No.
3992, as amended). the main aim of
motor vehicle registration is to identify
the owner so that if any accident
happens, or that any damage or injury
is caused by the vehicle on the public
highways, responsibility therefor can
be fixed on a definite individual, the
registered owner. Instances are
numerous where vehicles running on
public highways caused accidents or
injuries to pedestrians or other
vehicles without positive identification
of the owner or drivers, or with very
scant means of identification. It is to
forestall these circumstances, so
inconvenient or prejudicial to the
public, that the motor vehicle
registration is primarily obtained, in
the interest of the determinations of
persons responsible for damages or
injuries caused on public highways.
One of the principle purposes of
motor vehicles legislation is
identification of the vehicle and of
the operator, in case of accident;
and another is that the knowledge
that means of detection are always
available my act as a deterrent from
lax observance of the law and of the
rules of conservative and safe
operation. Whatever purpose there
may be in these statutes, it is
subordinate at the last to the primary
purpose of rendering it certain that
the violator of the law or of the rules
of safety shall not escape because
of lack of means to discover him.
The purpose of the statute is
thwarted, and the displayed number
becomes a "share and delusion," if
courts would entertain such
defenses as that put forward by
appellee in this case. No responsible
person or corporation could be held
liable for the most outrageous acts of
negligence, if they should be allowed
to pace a "middleman" between
them and the public, and escape
liability by the manner in which they
recompense their servants. (King vs.
Breham Automobile Co., Inc. 145 S.
W. 278, 279.)
With the above policy in mind, the
question that defendant-appellant poses
is: should not the registered owner be
allowed at the trial to prove who the actual
and real owner is, and in accordance with
such proof escape or evade responsibility
and lay the same on the person actually
owning the vehicle? We hold with the trial
court that the law does not allow him to
do so; the law, with its aim and policy in
mind, does not relieve him directly of the
responsibility that the law fixes and
places upon him as an incident or
consequence of registration. Were a
registered owner allowed to evade
responsibility by proving who the
supposed transferee or owner is, it would
be easy for him, by collusion with others
or otherwise, to escape said
responsibility and transfer the same to an
indefinite person, or to one who
possesses no property with which to
respond financially for the damage or
injury done. A victim of recklessness on
the public highways is usually without
means to discover or Identify the person
actually causing the injury or damage. He
has no means other then by a recourse to
the registration in the Motor Vehicles
Office to determine who is the owner. The
protection that the law aims to extend to
him would become illusory were the
registered owner given the opportunity to
escape liability by disproving his
ownership. If the policy of the law is to be
enforced and carried out, the registered
owner should not be allowed to prove the
contrary to the prejudice of the person
injured, that is, to prove that a third
person or another has become the
 owner, so that he may thereby be relieved
of the responsibility to the injured person.
The above policy and application of the
law may appear quite harsh and would
seem to conflict with truth and justice. We
do not think it is so. A registered owner
who has already sold or transferred a
vehicle has the recourse to a third-party
complaint, in the same action brought
against him to recover for the damage or
injury done, against the vendee or
transferee of the vehicle. The
inconvenience of the suit is no
justification for relieving him of liability;
said inconvenience is the price he pays
for failure to comply with the registration
that the law demands and requires.
In synthesis, we hold that the registered
owner, the defendant-appellant herein, is
primarily responsible for the damage
caused to the vehicle of the plaintiff-
appellee, but he (defendant-appellant)
has a right to be indemnified by the real
or actual owner of the amount that he
may be required to pay as damage for the
injury caused to the plaintiff-appellant.
If the foregoing words of wisdom were applied in
solving the circumstance whereof the vehicle had
been alienated or sold to another, there certainly
can be no serious exception against utilizing the
same rationale to the antecedents of this case
where the subject vehicle was merely leased by
petitioner to Rock Component Philippines, Inc.,
with petitioner retaining ownership over the vehicle.
having authorized the latter to drive his jeep.
The jeep was virtually stolen from the
petitioner's garage. To hold, therefore, the
petitioner liable for the accident caused by
the negligence of Sabiniano who was neither
his driver nor employee would be absurd as
it would be like holding liable the owner of a
stolen vehicle for an accident caused by the
person who stole such vehicle. In this regard,
we cannot ignore the many cases of vehicles
forcibly taken from their owners at gunpoint
or stolen from garages and parking areas
and the instances of service station
attendants or mechanics of auto repair
shops using, without the owner's consent,
vehicles entrusted to them for servicing or
repair.(at p. 496.)
In the Duquillo case, the defendant therein cannot,
according to Justice Diaz, be held liable for
anything because of circumstances which indicated
that the truck was driven without the consent or
knowledge of the owner thereof.
Consequently, there is no need for Us to discuss
the matter of imputed negligence because
petitioner merely presumed, erroneously, however,
that judgment was rendered against it on the basis
of such doctrine embodied under Article 2180 of the
new Civil Code.
WHEREFORE, the petition is hereby DISMISSED
and decision under review AFFIRMED without
special pronouncement as to costs.
SO ORDERED

Petitioner's reliance on the ruling of this Court

in Duavit vs. Court of Appeals and in Duquillo vs.
Bayot (supra) is legally unpalatable for the purpose
of the present discourse. The vehicles adverted to
in the two cases shared a common thread, so to
speak, in that the jeep and the truck were driven in
reckless fashion without the consent or knowledge
of the respective owners. Cognizant of the
inculpatory testimony spewed by defendant
Sabiniano when he admitted that he took the jeep
from the garage of defendant Dauvit without the
consent or authority of the latter, Justice Gutierrez,
Jr. in Duavit remarked;

. . . Herein petitioner does not deny

ownership of the vehicle involved in the
mishap but completely denies having
employed the driver Sabiniano or even